Short-term fixed deposits generally refer to tenures of 7 days to 1 year. They offer more flexibility than long-term FDs and help you park surplus funds for a brief period while earning a higher return than a savings account. The table captures key features of short-term and long-term FDs.
| Attribute | Short-term FD | Long-term FD |
|---|---|---|
| Typical tenure | 7 days–1 year | 1–10 years |
| Interest rate | Slightly lower than long-term FDs but higher than savings | Generally higher; benefits from compounding |
| Liquidity | High; ideal for emergency funds | Lower; early withdrawal penalties apply |
| Suitable for | Parking surplus cash temporarily | Building wealth for long-term goals |
Short-term FDs suit investors who prioritise liquidity and want to earn safe returns on surplus funds. Long-term FDs, on the other hand, benefit from higher rates and compounding. Evaluate your goal before choosing.
