You might want to break your fixed deposit in when you’re in need of money. But it is always advisable not do so. Here are the top four reasons why professional investors advice potential depositors to refrain from withdrawing an FD before maturity.

1. Penalty charges
Premature withdrawal of fixed deposit incurs a minimal percentage of penalty charges, which can be a substantial amount if your FD is of a significant amount.

2. Interest rate
Financial institutions can change their interest rate percentage, and you will have no say in it while choosing to withdraw your FD before maturity. Hence, you are on the losing side.

3. Reinvesting time frame
Some financial institutions give this option for the customers who are in dire need of money only for a specific time frame. This way you save a bit of interest by committing to reinvest the amount in that given time frame. But the disadvantage with it is that the time frame is usually less.

4. Implied interest
If your FD is in the third year of maturity; you will be receiving the interest rates similar to the first year. Therefore, the interest rate is constant regardless of the deposit duration; which can be a loss for you.

These are some disadvantages of premature withdrawal of fixed deposit. Avoid doing so to get full benefits of a fixed deposit.