Everything You Need To Know About Fixed Deposits In Malaysia
A fixed deposit, or ‘FD’, is a type of savings/investment account that promises the investor a fixed rate of interest. In return, the investor agrees not to withdraw or access their funds for a fixed period of time.
In a fixed deposit investment, interest is only paid at the very end of the investment period. Since the investment term and interest rate are fixed, you can easily calculate the interest you will earn at the end of any fixed deposit investment.
How do fixed deposits work?
When you invest in a fixed deposit investment, you have the option to choose a tenure (also known as ‘term’). When you select a tenure, you are deciding to put your money away and not touch it for a period of time (one month, three months, six months, one year, etc.). These tenures can vary anywhere from one month to five years.
Each tenure comes with a predetermined interest rate. For example, banks normally quote their fixed deposit interest rates in a table similar to the one below:
In the example above, if you invest in a fixed deposit with a 12-month tenure, you will be entitled to an interest rate of 3.15% p.a. at the end of three months. An investment of RM10,000 with a 12-month tenure will give you RM315 when the tenure ends.
Generally, the longer the tenure, the higher the interest rate will be. Banks often offer promotional fixed deposit rates as well, so it’s good to always be on the lookout. Promotional rates can go as high as 4.00% for a 12-month tenure.
What happens when you withdraw your funds before the tenure ends?
If you withdraw your funds before the fixed deposit tenure ends, you could lose part – or all – of your interest.
So before you place a large sum of money in a fixed deposit, you should consider if you need these funds in the foreseeable future, and plan your tenures accordingly. Otherwise, an early withdrawal could make you lose thousands of ringgit in interest earnings.
What kind of fixed deposits are there?
Here are a few types of fixed deposits you’ll find in Malaysia:
- Short-term fixed deposits. Got extra funds to put aside, but need them again in a month or two? Consider putting your funds in a short-term fixed deposit. The interest you’ll get won’t be earth-shattering, but it’s better than nothing.
- Long-term fixed deposits. If don’t need to access your savings anytime in the near future, consider putting them in a long-term fixed deposit. Some banks offer tenures of up to five years. Generally, the longer your tenure, the better your interest rates will be.
- Islamic fixed deposits. Islamic fixed deposits are based on the Shariah concept of Commodity Murabahah. When you place a deposit into an Islamic fixed deposit, you are essentially purchasing an approved Shariah-compliant commodity and selling it at an agreed marked-up price. As a result, you generate returns from your funds without involving the concept of interest.
- Foreign currency fixed deposits. These fixed deposit accounts allow you to hold savings in foreign currencies. This is helpful if you need to protect your savings against exchange rate fluctuations.
- Junior fixed deposits. Want your kid develop a saving habit? While conventional fixed deposits typically require you to be 18 and above to apply, younger savers can open an account with banks that offer junior fixed deposits.
- Senior citizens’ fixed deposits. Are you a retiree who’s wondering how to safeguard your nest egg? Consider a fixed deposit that’s geared towards senior citizens. Some fixed deposits, such as Hong Leong Bank’s Senior Savers Flexi Fixed Deposit, allows you to make an early partial withdrawal without losing any interest.
What are the advantages of fixed deposits?
So why should you put your savings in a fixed deposit? Here are a few benefits:
- Low-risk. Unlike investing in the stock market or in unit trust funds, it is safe to invest in a fixed deposit as your interest returns are guaranteed.
- Your money is insured. In the (very unlikely) event that your bank fails, Perbadanan Insurans Deposit Malaysia (PIDM) will reimburse you with the money you have deposited, up to RM250,000.
- Higher interest rates. Fixed deposits generally give you more interest than savings accounts.
- You can easily withdraw your money. Need your money for a financial emergency? With fixed deposits, you can withdraw your money at any time, although if you do so before your tenure ends, you could lose part or all of your interest.
What’s the difference between a fixed deposit account and a savings account?
A fixed deposit account is similar to a savings accounts, in that they’re both low-risk options to grow your money.
However, a major difference between the two is the interest rates offered. Fixed deposit accounts generally offer much higher interest rates, around 3% to 4% p.a. Savings accounts, on the other hand, usually offer interest rates below 2% p.a.
Some savings accounts do have interest rates similar to (or higher than) those of fixed deposit accounts, but they come with a few conditions – you may have to deposit a high amount of savings, use your account to pay a certain number of bills or spend a minimum amount with your linked credit/debit card every month.
Which banks offer the best fixed deposit rates?
The best fixed deposit account for you is not necessarily the one with the highest interest rates, but the one that best fits your needs. Nevertheless, these banks currently offer the highest interest rates for a six-month tenure:
|Bank||Minimum deposit||Interest rate (p.a.)|
|Standard Chartered Fixed Deposit/Term Deposit-i plus||RM100,000||5.00%|
|CIMB Bank Fixed Deposit||RM10,000||4.70%|
|HSBC Advance Time Deposit||RM10,000||4.00%|
|OCBC Fixed Deposit/Fixed Deposit-i||1 month: RM5,000|
2 - 60 months: RM1,000
|Bank Rakyat Term Deposit-i Account||1 month: RM5,000|
2 - 60 months: RM500
Rates are accurate as of August 2019
What are the historical fixed deposit rates in Malaysia?
Curious how today’s interest rates compare against those of past decades? In 2018, the average deposit interest rate was 3.143%. While it’s a huge dip from the highs of the 1990s, it’s a slight uptake from the previous years.
Of course, putting your money in a fixed deposit account is a great way to safely grow your wealth, but it isn’t the only way. If you have many years to go until retirement, and can tolerate the risk, consider investing your savings as well.