Discover essential rules for premature closure and extension in Post Office 5-year RD accounts. Get valuable insights and make informed investment decisions. Explore now!
In recent times, the interest in Post Office Recurring Deposit (RD) has surged, thanks to an increase in interest rates from 6.5% to 6.7%, which came into effect on October 1. If you’re contemplating investing in Post Office RD, there are several crucial aspects to consider. Much like Fixed Deposits (FDs), RDs have been a trusted investment option for many over the years.
This investment requires monthly contributions, and upon maturity, you receive your principal along with interest. While banks offer RDs for various durations, Post Office RDs require a commitment of 5 years. In this article, we will delve into the essential details you need to know before venturing into Post Office RD investments.
Understanding Post Office RD Interest Rates
The recent hike in interest rates for Post Office RDs, from 6.5% to 6.7%, has piqued the interest of potential investors. However, before you start your RD with the post office, it’s crucial to be aware of the rules surrounding premature withdrawals and extensions. Let’s explore these factors in detail.
Premature Closure of Post Office RD
As per the regulations, a Post Office RD account matures after a period of 5 years. However, if the need arises, you can opt to close it after three years from the date of opening the account. It’s important to note that if you decide to close the account even a day before the maturity period, you won’t receive the interest rate applicable to the current RD rate of 6.7%. Instead, you’ll be entitled to interest at the rate offered by the Post Office Savings Account, which currently stands at 4%. Hence, in such a scenario, you’ll earn a 4% return on premature closure.
Extending Your RD Account
If you wish to continue your RD account even after the initial five-year period, you will need to submit an application to the post office. However, it’s essential to understand that the interest rate on your extended RD account will remain the same as the rate offered when you initially opened the account. While the extended account can be closed at any time, there is a significant distinction in interest rates.
Upon closure, for full years of extension, the RD interest rate will apply. However, for tenures of less than one year, the interest rate applicable will be that of the Post Office Savings Account. Therefore, it is advisable to close the extended account only after completing one, two, three, or more years following maturity.
Eligibility for Opening an RD Account
Anyone who is 18 years or older can open an RD account in their name at the post office. Additionally, guardians have the option to open an account on behalf of a child. If the child is above 10 years of age and can provide a matching signature, they can open a post office RD account in their own name. Furthermore, two to three individuals can collectively open a joint RD account for themselves.
Investing in a Post Office RD can be a secure and beneficial way to grow your savings. With attractive interest rates and flexible options for premature closure and extension, it’s a suitable investment avenue for both individuals and families. Be sure to assess your financial goals and consult with a financial advisor to determine if Post Office RD aligns with your investment strategy.