# 4 Major reasons why you should use an RD calculator while doing Recurring Deposits Major Reasons you should use RD Calculator for Recurring Deposits

If you are looking for an investment opportunity which would involve both regular savings while earning interest, then a recurring deposit (RD) is the right choice for you. This type of savings allows you to make small investments monthly. Of course, you can decide the amount as per your budget, and continue getting a fixed amount of interest every month. This small contribution at given intervals would allow you to earn interest on your savings. However, before setting a specific investment, you must try an RD calculator which provides you with a clear idea of how much you shall be rewarded in the form of interest. In fact, a recurring deposit made without the use of an RD calculator would mislead you with a false profit approximation. As a result, your investment will not seem useful or profitable. So, let us first read what an RD calculator is.

Also Read: Latest Post Office Interest rates in Mar-20

What is RD calculator?

As the name suggests, an RD (recurring deposit) calculator is used to calculate the exact amount you can make out of the recurring deposit with a recurring amount. In other words, it shows how much interest you can accumulate for a particular deposit amount decided at the given rate of interest by the bank for a specific tenure.

For instance, the amount of deposit varies from bank to bank and generally, it starts from INR 500 for a minimum tenure of six months. On the other hand, some of the banks who offer online RD facility fix a minimum tenure of 12 months. In any case, an RD calculator will calculate the maturity at the end of the tenure on a given rate of interest.

Four major reasons why you should use an RD calculator

As of now, you have a fair idea what an RD calculator is. Thus, we can explore further about its uses and why it is important. Read the four main reasons why you should use a recurring deposit calculator-

1)  Maturity value

An RD calculator helps to calculate the maturity amount depending on various factors:

Amount of deposit: It is the amount that you decide to invest in your RD account every month. The minimum deposit amount varies from bank to bank.

Deposit Tenure: It is the time you set for your investment. The maturity value will also depend on this tenure.

Rate of interest: The interest amount depends on the amount of investment as well as it varies from bank to bank.

Interest compound frequency: It calculates the maturity value on the monthly deposit amount. The interest on RD is generally compounded quarterly.

2) Help determine the amount of investment

It is only through an RD calculator, one can decide the amount to be invested for a specific period of time. The rate of interest here plays the most vital role. However, one must be aware of the calculation so as not to confuse the total return as the expected value.

3) Helps calculate compound interest on RD

As mentioned earlier, the RD interest is compounded quarterly. This is then added up to make or determine the final amount. There is a formula used to calculate compound interest:

A = P(1 +r/n)^ nt

where A = final amount procured

P = principal

r = annual interest rate

n = number of times interest compounded per year, and

t = tenure

However, since manual calculations are error-prone it is always better to use an rd calculator which gives accurate as well as instant results.

4) Better future investment plan

The RD calculator helps an investor to make better decisions in the future with utmost clarity. Moreover, it is convenient to use and can save a lot of time for the investor.

Needless to mention, the accuracy of the RD calculator is as obvious as any other calculator. The saving scheme offered by recurring deposit is very appreciable and not to miss the easy process of opening such an account. In addition to this, it also allows you to start with a smaller investment and once you are satisfied with the maturity, you can start another investment with better more investment value.

Also Read: LIC Launches Nivesh Plus Term Plan – Should you opt?

What is the process of opening recurring deposit online?

Now, with the progress of technology, one can also open an RD account online. If an individual has a savings account in any of the banks and he wants to start a recurring deposit scheme, he can simply check on the application of the bank or on its website. The process to start recurring account online can be explained in the following points-

1) Login to the internet banking/application of your bank.

2) Search for the option to start a recurring account with the bank.

3) Click on the create a fixed deposit account.

4) Fill the details that the bank requires.

5) The site will offer you to select the amount and tenure of the deposit.

6) Once you have filled all the spaces and completed your application accepting the terms and conditions, the bank will mail you in the registered email ID.

Recurring deposits offer guaranteed returns and the investment (principal amount) is also safe with the investing institution. These perks are far more beneficial than what comes with other investment options. Hence, put your monthly savings in a recurring account and let your money grow.