Fixed deposits help you diversify your funds for a fixed term so that you will be able to earn returns at a fixed interest rate, which is usually a little higher than the interest rate that is offered on a savings account. However, the interest you earn on fixed deposits may not be able to beat inflation, as the interest earned is comparatively lower and may also be subject to a tax deduction. There may also be bank charges for premature withdrawal or closing of a fixed deposit account.