Most banks usually charge a penalty for withdrawing your fixed deposit before its maturity. This penalty is usually 0.5% – 1.00% of the rate of interest. However, some financial institutions and banks may not charge any penalty if you are withdrawing the amount due to an emergency.
#2 Interest Loss
You invest in fixed deposits to earn interest on your invested amount. When you make a premature withdrawal from your fixed deposit, you will lose out on the interest income that you would have earned on completing the tenure.
#3 Prevention Of Growth
Fixed deposit investments have the potential to multiply into a substantial amount over time. The longer the investment tenure, the more value addition you can get on your fixed deposit. You can use this multiplied capital for various financial goals. However, when you withdraw your FD prematurely, it will hinder this growth as you will only receive your invested amount back, without any incremental amount.