Understanding Cumulative and Non-Cumulative Fixed Deposits: A Guide
Fixed deposits (FDs) are a popular investment option among people looking for a low-risk way to earn steady returns. One of the main advantages of FDs is that they offer a fixed rate of interest over a predetermined period of time. This means that you know exactly how much you will earn on your investment at the end of the term.
When it comes to FDs, there are two types that you should be aware of: cumulative and non-cumulative FDs.
Cumulative FDs
As the name suggests, in a cumulative FD, the interest earned is added to the principal amount and reinvested. This means that the interest earned in each year is added to the principal amount and the interest for the subsequent year is calculated on the new higher amount. This results in compounding of interest...