Key Takeaway
Cumulative FDs reinvest interest, compounding your returns. Non-cumulative FDs pay interest regularly (monthly/quarterly). Cumulative deposits earn 10–15% more total returns over the same tenure due to compounding.
2,00,000
7.5%
5 Years
Cumulative Option2,89,990Interest: ₹89,990 (compounded quarterly)
Monthly Payouts1,250Total interest: ₹75,000
Quarterly Payouts3,750Total interest: ₹75,000
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.
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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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