What could be the reason for the higher interest rate earned on fixed deposits Class 7
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What could be the reason for the higher interest rate earned on fixed deposits Class 7
What could be the reason for the higher interest rate earned on fixed deposits as compared to a savings account? Class 7
Answer:
- Longer Commitment: Fixed deposits require you to keep your money in the bank for a set time, like 3 or 5 years. This longer commitment allows banks to use your money for loans, so they pay you more interest.
- Less Flexibility: Savings accounts let you withdraw money anytime, which means banks can't use that money for long-term loans. Since fixed deposits are less flexible, banks reward you with higher interest rates for keeping your money locked in longer.