December 01 2021 | Chit Funds |    VIEWS

Are Chit Funds better than Fixed Deposits?

Chits versus fixed deposits

Chit Funds

Although the nature of chit funds and fixed deposits are completely different and even contrary with respect to certain features, they are always pitted against each other and compared to each other. 

So let us decode both of these popular financial investments and understand how in today’s day and age, chit funds are clearly the winner. 


With respect to deposits, a fixed deposit is about receiving interest on the money saved. Whereas, when it comes to chit funds, you receive interest for saving money. Thus, more rewarding in nature. A fixed deposit is about receiving interest for a lump sum amount that you already have. Whereas, chit funds are exactly the opposite. It is about depositing small amounts of money to create a pool of lumpsum amount you can use.

Lockin Period

Fixed Deposits are specific about the time period as the money will be locked in for a stipulated period of time for the interest to generate. Whereas with respect to chit funds, there is no lock-in period. You can win the bid and retrieve the amount at any time you wish, hence more flexible.


Fixed deposits on maturity accrue a fixed dividend depending on the rate of interest whereas with chit funds, you receive dividends month on month depending upon the amount of bid, made. Moreover, the value of the dividend you receive through chit fund is much higher than what you receive through an FD. Especially in today’s times, as FDs offer a low rate of interest, causing a big downswing in dividends.


Talking about the interest value, most banks offer 5% – 7% interest on Fixed Deposits. Whereas by investing in a registered and regulated chit fund like myPaisaa, you can be certain of receiving 10% interest annually. Yes, Chit Funds pay competitive interest rates higher than banks. 


This is certainly one of the hallmarks of chit funds. Yes, chit funds are liquid funds. In the sense, they can be converted to cash almost immediately. The chit can be bid into money and used for emergencies or any immediate necessity. Whereas, with respect to Fixed Deposits, the principal amount can be received only on maturity. If you are insistent on breaking the FD before it matures, you are bound to pay a heavy fine for the closure of the FD. 


The returns you garner from your Fixed Deposit are subject to inflation. The real returns you earn from your FD which is the difference between the interest rate and the inflation, might dip. For example, if a bank’s 1 year interest rate is 5% and inflation is 5.2%, then you might receive -2%. But when you invest in a chit fund, you are borrowing from your own personal fund which is fluctuation-free. 

From all the aspects above in terms of Deposit, Liquidity, Dividends, Inflation, Lock-in Period, & Interest, Chit Funds are definitely the preferred choice over Fixed Deposits. So what are you waiting for? Start your Sustainable Savings journey with myPaisaa today!


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