From the State Bank of India (SBI) to ICICI Bank, Bank of Baroda, Kotak Mahindra Bank, and IndusInd Bank, all offer holiday recurring deposit for their customers. If you are also planning to take a vacation, and are looking where to park your money, start with these bank RDs to get the best returns. Reports suggest more and more people are planning for long domestic and international holidays and are saving for them. To cater to such people, banks along with travel companies have come up with various products.
Thomas Cook offers ‘Holiday Savings Account’ through which you can save for your travel. To open a Thomas Cook holiday savings account, you would need to open a recurring deposit (RD) with the partner banks.
What’s in it for you?
You can save in this account in 12 monthly installments. On maturity of the account, with the interest earned on 12 installments along with the top-up from the company, the money gets transferred to the account holder’s Thomas Cook wallet.
Though the RD rates vary from bank to bank, however, Thomas Cook states you could earn an interest of up to 7.65 per cent per annum. For example, if you choose BOB under Thomas Cook’s holiday account, you’ll earn 6.70 per cent as interest (as per the bank’s current RD rates) at the end of 12 months, whereas with SBI you will earn 6.8 per cent for the same tenure.
There is also a top-up option contributed by Thomas Cook. The company contributes 5 per cent of the total package cost. For instance, if your package to Canes costs Rs 1.2 lakh and you save for it through the holiday account, the company will contribute 5 per cent of the total package, i.e. Rs. 6000.
You can also customize your package to change your destination till the ninth installment or add or remove passengers. However, there are limitations added to this. For instance, in case you add a passenger, you will have to pay 50 per cent of the extra amount upfront and the rest when your RD matures.
In case you delay paying the installments or withdraw before maturity, you might also be charged a penalty by your bank. If you withdraw your RD before maturity, banks generally deduct 1 per cent as penalty on the interest earned. For delay in payments, SBI, for instance, charges Rs 100 per month. At the end of 12 months the amount you accumulate along with the interest and top-up, cannot be used for multiple trips. It can be redeemed in one trip only.
You also need to schedule the holiday within 90 days after you pay your 12th installment. If you are unable to do so, you will not get the 5 per cent top-up from the company but you can claim a refund with the interest earned on the principal amount from the company.
Experts suggest people who are sure to take a trip within a year, should only opt for these types of product, as you cannot change your mind once you have opted for it. As an alternative, people can opt for an SIP in an ultra short-term debt fund to save for such plans.