Which Fixed Deposit Is Right for You? Callable Vs Non-Callable FDs Compared

Callable FDs allow early withdrawals while non-callable FDs lock in your funds until maturity. Each has its pros and cons and is suitable for different needs.

Your choice depends on your needs—callable FDs provide access to funds but lower returns, while non-callable FDs offer better interest but keep your money locked in.

Source : Groww

When investing in fixed deposits (FDs), most people focus on interest rates and tenure, but not the type of FD they’re investing in. FDs have been the go-to choice for safety, guaranteed returns, and simplicity. But did you know, that there are two types of FDs—callable and non-callable? 

Callable FDs allow early withdrawals while non-callable FDs lock in your funds until maturity. Each has its pros and cons and is suitable for different needs. Let’s understand how these are different to help you make a smarter choice.

What Are Callable FDs?

Callable FDs come with the flexibility of premature withdrawals, which means you can withdraw funds before the deposit matures. You can either withdraw a portion of your deposit or all of it, depending on your needs. But, this flexibility comes at a cost. Early withdrawals require banks to keep reserves, leading to slightly lower returns. However, they are a popular choice for those prioritising quick access to their savings. Callable FDs are most popularly known for their following features:

Liquidity: You can access your funds in emergencies. This flexibility can be helpful, even with penalties.

Flexible options: You can choose how long to invest and how much to deposit. This makes it easier to match your FD to your financial plans.

Low deposit requirement: Many callable FDs have a low minimum deposit, making them accessible to new investors and those with small savings.

What Are Non-Callable FDs?

Non-callable FDs operate like regular FDs but don’t allow early withdrawals and your money stays locked in until maturity. Compared to callable deposits, these FDs offer higher interest rates, making them ideal for long-term investors who have no urgent requirement for funds. 

Non-callable FDs have several advantages that make them ideal for investors seeking higher returns and financial discipline. One of the key benefits is higher interest rates, especially compared to callable deposits. Banks offer higher rates on non-callable FDs as the funds stay locked in, giving them stable capital with lower liquidity risk. 

Key Factors To Consider

To choose the right FD for your needs, keep these factors in mind.

• Interest rates and returns - Non-callable FDs provide higher interest rates because they require you to keep your funds locked in for the full term without the option for premature withdrawal. In contrast, callable FDs, while offering slightly lower rates, compensate for this with greater flexibility, allowing you to access your money before maturity if needed. 
• Liquidity and flexibility - If you need easy access to your savings, callable FDs offer more liquidity and flexibility. In contrast, non-callable FDs lock in your funds for a fixed period, restricting withdrawals.
• Investment goals and horizon - Choosing between callable and non-callable FDs depends on your goals and timeline. For short-term needs, callable FDs offer flexibility. For long-term wealth building, non-callable FDs provide stability and better returns.

Who Should Choose Callable Or Non-Callable FDs?

Callable FDs offer flexibility, allowing early withdrawals for emergencies, making them ideal for short-term savers or those with unpredictable needs. They also come with lower deposit requirements. Non-callable FDs, on the other hand, suit long-term investors seeking higher returns. With no early withdrawals, they encourage disciplined saving for goals like retirement or education. Your choice depends on your needs—callable FDs provide access to funds but lower returns, while non-callable FDs offer better interest but keep your money locked in.

(The author is the DGM-Communication at BankBazaar.com. This article has been published as part of a special arrangement with BankBazaar)