What is the difference between a fixed deposit and a bond?
Short answer
A fixed deposit is a bank deposit for a set term at a set rate, usually withdrawn only at maturity. A bond is a tradable debt security whose price changes in the market and whose payments depend on the issuer’s credit.
Most relevant for: भारत (India)
Fixed deposits (term deposits)
You place money with a bank for a fixed period, such as one to five years, at an agreed interest rate. Interest is paid at maturity or at intervals. The deposit is normally not tradable, and withdrawing early usually incurs a penalty. In the United States the equivalent is a certificate of deposit (CD). Deposits are covered by deposit insurance schemes up to limits set by law, for example by the DICGC in India and the FDIC in the United States.
Bonds
A bond is a loan to a government or company that pays a coupon and returns the face value at maturity. Bonds are traded, so a holder can sell before maturity at the market price, which can be above or below the price paid. Bonds are not covered by deposit insurance, and their safety depends on the issuer: government bonds from stable countries carry low credit risk; corporate bonds carry more.
Side by side
Features differ in ways that matter for liquidity, risk and returns.
| Feature | Fixed deposit | Bond |
|---|---|---|
| Issuer | Bank | Government or company |
| Tradable | Generally no | Yes, on a market |
| Price changes | No | Yes, with rates and credit |
| Early exit | Penalty | Sell at market price |
| Insurance | Deposit insurance up to a limit | None |
Reading the numbers
Compare after-inflation returns, the tax rules that apply in your country, the compounding frequency of deposits and the credit rating of a bond issuer. A bond’s yield changes as its price changes. This page is general information, not advice on which to hold.