Are you depositing Fixed Deposits(FD’s) in Banks, and are not familiar with the terms- “Cumulative and Non-Cumulative” Deposit Pay-outs, You have to know the difference between the two-
Cumulative Fixed Deposit– In this type of deposits the interest is calculated “Quarterly” and paid at the time of Maturity.
That means, the initial amount you have deposited with the bank gets “Compounded every 3 Months“.
Non-Cumulative Deposits– In this type of deposits, the interest is paid in equal intervals(Generally Monthly, Quarterly and Half-Yearly) as exercised by the depositor at the time of deposit with the bank.
Which is Better- Cumulative or Non-Cumulative Deposits?
Cumulative Deposits are suitable for those who have surplus income and don’t require the money for a specific period. He can decide the specific period whether it may be 1 Year, 2 Years, 3 Years or 5 Years as per his wish and avail lumpsum amount at the time of maturity.
Non-Cumulative Deposits are suitable for those who require regular source of income in the form of “Interest”earned on the deposits. Generally senior citizens, low income group people prefer Non-Cumulative Deposits as they have low income source and wants regular income month-on-month.
Generally Cumulative Deposits earn more interest as they are compounded every 3 Months and payable at maturity
Both Cumulative and Non-Cumulative Deposits have their Pros and Cons. It has to be decided by the depositor to choose either of the two as per his needs and requirements.