How is the Interest Paid on a Fixed Deposit (FD)?

Interest on a Fixed Deposit (FD) is paid in one of the following ways:

• Cumulative Interest: Interest is compounded and added to the principal amount. At maturity, the total amount received includes the principal and the accumulated interest.
• Non-Cumulative Interest: Interest is paid out typically at regular intervals, such as monthly, quarterly, half-yearly, or annually. These payments are made separately from the principal amount.

The method of interest payment is usually selected when the FD is opened, and the payout intervals depends on respective lender’s policy.