Choosing And Investing In The Best Fixed Deposit In Malaysia
Due to the safety of investment and guaranteed profits, fixed deposits are often among the favourite investment options for Malaysians.
Today, almost all banks offer fixed deposit accounts. Some banks even offer multiple fixed deposit options to choose from, which means it can be tricky trying to decide on the best fixed deposit account.
If you are considering a fixed deposit in Malaysia, below are some tips and considerations:
Choosing the right investment term
The two main types of fixed deposit investment terms are short-term and long-term:
Short-term: the typical definition of short-term deposits is investments with period that are less than one year, and can start from as short as one month.
Short-term fixed deposits are suitable for those who have a quick savings goal, or who prefer flexibility and not to lock away their savings for a long period of time. Some common short-term fixed deposit terms are 1 month, 3 months, 6 months and 9 months.
Long-term: Anything above 12 months are normally considered to be long-term, and in Malaysia, fixed deposit terms can go up to five years.
If you don’t need access to your funds in the near term and would like to benefit from higher interest rates, then long-term fixed deposits may be a great option for you.
When considering the term of your fixed deposit in Malaysia, be aware that many banks require a different minimum deposit depending on the term you choose. Also, fixed deposit rates are usually tiered, such that the more money you invest and the longer period you choose, the higher your interest rate will likely be.
Fixed deposit fees & charges
In Malaysia, banks don’t normally charge any establishment fees, setup fees or periodic charges with fixed deposit accounts. However, it is worth double-checking with your bank before you sign any contracts.
You may however incur a penalty fee if you decide to break out of your agreement with the bank earlier than what was agreed.
Fixed deposit penalty fee calculation
Different banks calculate their penalty fees differently. Some may deduct a percentage off your interest rate – for example, if you were promised a 4% interest rate on a 6 month fixed deposit and the bank’s penalty rate is 2%, then you would only receive 2% in interest if you choose to access your funds within the agreed 6 month period.
Some banks may also charge what is known as a “break cost”. This is essentially a one-off fee payable to the bank for not honouring your agreement. Break costs depend on several factors, including the bank’s current interest rate (at the time you want to access your funds), the interest rate agreed on your fixed deposit investment, and the amount of money in your fixed deposit account.
The penalty for breaking your fixed deposit agreement can be quite significant, so it is often advisable that you are ready to lock away your money for the agreed period before you sign any agreement. If you are not prepared to do so, simply choose a shorter term.
Fixed deposit interest rate
Ultimately, when you invest in fixed deposits, it is the interest rate that matters most. For a given term, the higher the interest rate offered, the better.
Banks can however complicate matters by including special/promotional rates that may be short-term and/or with conditions attached. For example, some banks offer a high interest rate only if you simultaneously apply for a different product offered by the same bank, or only if you have a large minimum deposit amount.
When you compare fixed deposit interest rates between banks, be sure to look out for these non-standard terms and conditions.