Fixed Deposit: Basics You Should Know

Key Points

  1. Fixed Deposits (FDs) offer a stable way to invest your money for first-time investors.
  2. You are only advised to withdraw your investment once it has matured.
  3. Fixed deposit is an account that promises the investor a set rate of interest in return.

One of the most important steps in building your wealth is choosing how you’ll invest it. The idea of investing in the stock market or even just putting money under your mattress is nerve-wracking. That’s why many people turn towards fixed deposits for security and convenience. It may not offer as much return compared to stock investment, but at least you know your funds will be worth every month!

Whether you’re investing in stocks, bonds or other different investment options, it’s important to know as much about the investments before making a choice so that your capital remains safe and earnings meet expectations.

Fixed Deposit is a popular choice for first-time investors who want to invest in something secure and with known returns. Fixed deposit is one of the most secure and reliable investment options through which you can earn higher interest than with a regular savings account, but there are still things you should know before opening an account.

We are going to tell you more about it in this article.

What Is a Fixed Deposit?

Fixed deposit, also known as ‘FD’ in Malaysia, is an account that promises the investor a set rate of interest in return. The difference between a conventional savings account and a FD account is clear. For conventional savings accounts, you are able to withdraw money at any time. However, for fixed deposits, you are only advised to withdraw your investment once it has matured without getting penalized with a fee.

By investing in a fixed deposit account, you know exactly how much interest will be paid at the end of your investment period. This makes it easy to calculate and track any earnings on these types of accounts!

How Do Fixed Deposits Work?

There are many different tenure (a.k.a terms) you can choose from when opening a fixed deposit account. These vary from one month to five years and will affect the length of time your money is available for use, so CHOOSE the one that fits you most.

Each tenure comes with its own set of interest rates and it really depends on the bank you choose. For example, when you open a fixed deposit by placing RM10,000 with 12-month tenure with an interest rate of 2.4%, it will give you RM240 when the tenure ends.

Therefore, the longer the tenure, the higher interest rates will be. Remember to lookout for a bank offered promotional interest rate, which will provide extra earning over time.

What If I Withdraw My Funds Before Mature?

The early withdrawal facility of a fixed deposit account is an attractive feature that allows you to withdraw money from your investment even before it matures. However, there are some penalties for doing so which should be considered carefully as well. Withdrawing your funds before the fixed deposit tenure ends could result in a loss of part-or-all interest.

Before you invest in a fixed deposit, it’s important to consider if the funds will not be needed in your near future and plan accordingly. Otherwise an early withdrawal could result in thousands lost on interest earnings! The funds you invest in a fixed deposit should not be a problem that affects your daily basis.

Types of Fixed Deposits

Malaysia has a variety of different types of fixed deposits accounts that offer differing benefits. Let’s have a look at it!

Short Term Fixed Deposit

You can get your hands on a quick and easy savings goal with these short-term fixed deposits. They’re perfect for people who have a quick savings goal. It can be as short as one month or a good six months.

If you have some extra funds that need to be put away for a while, consider investing in short-term fixed deposits. You won’t get the best rate of interest but at least it’s more than nothing!

Long Term Fixed Deposit

Those fixed deposits that are a year or more are usually considered to be long term, and it can reach up to five years in Malaysia.

The longer you keep your savings in a fixed deposit account, the better interest rates will be. So if you don’t need access to your funds for a long amount of time, consider putting money into long-term fixed deposits with tenures as high as five years or more!

Conventional Fixed Deposits

Conventional fixed deposits offer a guaranteed rate of return based on the period that you invest for. They vary from 1 month to 60 months depending on the bank and the product. The bank guarantees that you will be paid at maturity the agreed rate of interest on fixed deposits.

Islamic Fixed Deposits

Islamic fixed deposits are based on the Shariah concept of Commodity Murabahah. Islamic fixed deposits are an innovative way to invest in Shariah-compliant goods and generate returns without involving the concept of interest. There are three different Islamic fixed deposits in Malaysia:

  • Mudharabah Deposits
  • Murabahah Deposits
  • Wakalah Deposits

Foreign Currency Fixed Deposits (FCFD)

The idea behind a foreign currency fixed deposit is to give investors that would like to keep foreign currency for future use and hedging against fluctuations in exchange rates. You can only withdraw all funds from this account without restrictions once the agreed fixed term has expired.

Difference Between A Saving and FD Account

There’s a reason banks offer less valuable interest rates on savings accounts, due to the availability of instant access to cash, without any penalty.

When opening a fixed deposit account, the customer deposits money for an agreed-upon amount of time, in return of guaranteed interest rates from the bank over time. However, you are not able to withdraw your money before maturity or you will get penalized.

Pros and Cons Of Fixed Deposit

Fixed deposits offer a number of benefits, including the following:

Low Risk

Putting your money in a fixed deposit is one of the most safe ways to invest among other types of investments. Not only it guarantees a fixed rate of interest over time, and it will not be as volatile as the stock market.

Fixed Tenure

When you invest in an FD scheme, your money is guaranteed and earns returns. The tenure up to five years ensures that there are no risks involved with investing for this long period!

Various Options That Suit Your Needs

Depending on your personal preference, you can choose to invest in a short term or long term fixed deposit. If you have a plan for future needs, you might consider investing in a long term manner, so that you could achieve your goal with the additional returns from fixed deposits.

However, if you have extra small money to invest, you could consider investing in a short term fixed deposit. With this you are able to withdraw your money in a short amount of time without penalty, but the interest rate is not high either.

However, when there is light, there is shadow. There are drawbacks when investing in fixed deposits too.

Lower Return

Compared to investments that are more volatile, the return for fixed deposits is considered low. Lower risk as a result of lower return, cannot blame for that.

Penalty If Withdraw Before Maturity

Even if you want to withdraw your funds before the maturity date, there will be a penalty charge. There’s a chance you could lose your interest returns if you withdraw money before the tenure ends.

How To Calculate Fixed Deposit Rate?

The rate of interest for fixed deposit is computed daily. Most banks in Malaysia calculate the total interest returns using formula below:

Money Invested x Interest Rate Quoted x (Placement Period in Months / 12 Months) = The Total Interest Earned

How Do Open A Fixed Deposit Account?

Now you are interested in investing in a fixed deposit account, and we have listed down the requirement to open one account.

  • Malaysian or non-Malaysian with aged 18 and above
  • For aged 18 and below Malaysian, must have an intrust account
  • Applicable for individual and non-individual customers
  • Minimum initial deposit of RM1,000 for 1 month or RM5,000 for 2 months and above
  • MyKad for identification (Malaysian)
  • Passport (non-Malaysian)

When you sign up for an FD, the bank will issue your certificate or statement as proof of placement. This certificate will allow you to check your principal deposit amount, placement period and interest rate. You can also view the date of maturity!


There’s no better time than now to start building up your savings by investing. Don’t let it gather dust! Keep an eye on the interest rates, and be sure that you know all of these non standard terms before committing yourself into a fixed deposit account.

Fixed deposits are one of the most stable investment options in Malaysia. Remember to do more research and understand fixed deposits before opening an account. Select a reputable bank to experience utmost convenience with their services!

Click here if you need to know more about investing!

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