{"id":2021,"date":"2024-07-22T06:00:26","date_gmt":"2024-07-21T22:00:26","guid":{"rendered":"http:\/\/blog.imoney.my\/?p=2021"},"modified":"2024-09-17T13:47:34","modified_gmt":"2024-09-17T05:47:34","slug":"what-is-fixed-deposit-how-do-fixed-deposits-work","status":"publish","type":"post","link":"https:\/\/www.imoney.my\/articles\/what-is-fixed-deposit-how-do-fixed-deposits-work","title":{"rendered":"Everything You Need To Know About Fixed Deposits In Malaysia"},"content":{"rendered":"

A fixed deposit, or \u2018FD\u2019, is a type of bank 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.<\/p>\n

In a fixed deposit, 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.<\/p>\n

<\/span>How do fixed deposits work?<\/span><\/h2>\n

When you open a fixed deposit account, you have the option to choose a tenure (also known as \u2018term\u2019). 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.<\/p>\n

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:<\/p>\n\n\n\n\n\t\n\n\t\n\t\n\t\n\t\n\t
Tenure\/Term<\/center><\/th>
Interest Rate (% p.a.)<\/center><\/th>\n<\/tr>\n<\/thead>\n
1 month <\/center><\/td>
1.50<\/center><\/td>\n<\/tr>\n
2 months <\/center><\/td>
1.65<\/center><\/td>\n<\/tr>\n
3 months <\/center><\/td>
1.70<\/center><\/td>\n<\/tr>\n
6 months <\/center><\/td>
1.80<\/center><\/td>\n<\/tr>\n
12 months <\/center><\/td>
1.85<\/center><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n\n

In the example above, if you open a fixed deposit with a 12-month tenure, you will be entitled to an interest rate of 1.85% p.a. at the end of three months. A placement of RM10,000 with a 12-month tenure will give you RM185 when the tenure ends.<\/p>\n

Generally, the longer the tenure, the higher the interest rate will be. Banks often offer promotional fixed deposit rates as well, so it\u2019s good to always be on the lookout. Promotional rates can go up to 2.75% for a 12-month tenure.<\/p>\n

<\/span>What happens when you withdraw your funds before the tenure ends?<\/span><\/h2>\n

If you withdraw your funds before the fixed deposit tenure ends, you could lose part \u2013 or all \u2013 of your interest.<\/p>\n

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.<\/p>\n

Some people get around this by placing multiple fixed deposits with different tenures (this is known as fixed deposit laddering<\/em>). For example, say you have RM30,000. You could place RM10,000 on a one-year tenure, RM10,000 on a two-year tenure and RM10,000 on a three-year tenure. This spreads out your money so that it\u2019s more accessible, rather than locking it up for several years.<\/p>\n

<\/span>What kind of fixed deposits are there?<\/span><\/h2>\n

Here are a few types of fixed deposits you\u2019ll find in Malaysia:<\/p>\n