Fixed deposit (FD) is a type of short-term investment where an investor deposits a certain amount of money and agrees to refrain from withdrawing their cash for a set length of time. Upon maturity, investors will be paid a great interest rate, which is usually more significant than a conventional savings account. New investors prefer it because it is insured by the government and ensures high returns, depending on the interest rates and the tenure.
Among other reasons, you should choose fixed deposit because:
You should know the interest rates upon maturity to ensure you gain a great amount of return. Interest rates differ from bank to bank and tenure to tenure.
Different banks offer different tenures, ranging from 1 month to a few years. Choose the one that suits your needs and financial goals.
It is crucial to identify all costs incurred to avoid spending more than expected.
You should be informed of the penalty amount to know what to expect if you need to withdraw the money before maturity.
Being aware of the customer service and the reputation of the bank you are planning to apply your fixed deposit account is an important step! Do thorough research before deciding on a bank.
There are 2 types of fixed deposits available:
Interest is payable upon maturity and is compounded annually.
Interest is payable according to your preference (monthly/ quarterly/ annually).
You are eligible to apply for a fixed deposit if you are above 18 years old. Luckily, certain banks allow individuals below 18 years old to apply for a fixed deposit. Refer to your preferred banks.
Generally, your identification card is the only document needed to apply for a fixed deposit, but different banks have different requirements. Refer to your preferred banks.
1 to 60 months. You are free to choose the length depending on your needs and financial goals.
For a tenure of 1 month, most banks would require you to deposit at least RM5,000. If you plan to lock your money for 2 months and above, a minimum of *RM500 or RM1,000 is required. Additionally, please take note that for a non-cumulative fixed deposit, RM5,000 is the minimum amount.
*Depending on the terms of the bank
Interest rates depend on the bank you chose and the tenure. In general, they range from **1.1% – 2.1% p.a. But you should also know that some banks are willing to negotiate the interest rate if you lock your money for more than 24 months.
**As of 25 March 2022
There are 3 scenarios of withdrawal:
Withdrawal within 3 months of account opening
No interest will be paid to you
Withdrawal after 3 months of account opening
50% interest of the completed months will be paid to you
Only some banks allow this and, in most cases, withdrawal of multiples of RM1,000 is allowed. Refer to your preferred banks.
It stands for per annum or each year.
The amount of return earned by depositors.
The amount of time the money is locked in a fixed deposit account.
The amount of money locked in a fixed deposit account to earn interest.
The additional charge from the bank for withdrawals before maturity (or premature withdrawal).
The end of a set time when an investment becomes due, and the principal and interest are repaid.
The money withdrawal in a fixed deposit account before maturity.
The withdrawal of part of the amount in a fixed deposit account before maturity.