Cumulative vs Non-Cumulative FD
Comparison Summary:
- Choosing **Cumulative FD** earns you ₹14,990 more than Monthly Payouts due to compound interest.
- Use **Non-Cumulative FD** only if you rely on regular monthly payouts to cover living expenses.
What to do next
Based on your Cumulative vs Non-Cumulative FD, here are the tools you should try next:
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Cumulative vs Payout FD Compounding Formula
Compares interest returns under compounding cumulative deposits with monthly/quarterly non-cumulative income payouts.
Worked Example: ₹2 Lakhs FD at 7.5% p.a. for 5 years
FD Types: Choosing between interest compounding and regular payouts
Aditi and her retired mother both invested ₹3 Lakhs in fixed deposits at 7.5% interest. Aditi chose a Cumulative FD to maximize growth, while her mother chose a Non-Cumulative FD with monthly payouts.
After 5 years, Aditi's cumulative deposit grew to ₹4,34,985 (interest: ₹1,34,985) due to quarterly compounding. Her mother received a monthly cash payout of ₹1,875 (total: ₹1,12,500) to cover monthly bills.
Cumulative FDs compound interest quarterly to maximize long-term wealth, while Non-Cumulative FDs pay interest monthly/quarterly to provide regular income.
Choose cumulative deposits for long-term growth and non-cumulative payouts if you rely on regular cash flow for living expenses.
Frequently Asked Questions
What is a cumulative fixed deposit?
In a cumulative FD, interest earned is compounded quarterly and paid out along with the principal only at the time of maturity.
What is a non-cumulative fixed deposit?
In a non-cumulative FD, interest is paid out regularly (monthly, quarterly, or half-yearly) to provide a steady income stream.
Which FD type yields higher returns?
Cumulative FDs yield higher returns because the quarterly interest earned is reinvested, compounding your interest gains.
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