For many Malaysians, a fixed deposit is one of the safest ways to grow savings with guaranteed returns. Fixed deposits offer predictable outcomes and PIDM protection, making them a common choice for first-time savers who value stability over higher but uncertain returns.

What Is A Fixed Deposit Account?

A fixed deposit, or FD, is a bank savings product where you place a lump sum of money for a fixed period, usually between one month and 60 months. In exchange, the bank pays you a guaranteed interest rate, which is typically higher than a regular savings account.

Once an FD is placed, both the amount and the term are locked in. The term refers to how long you leave the money with the bank. You agree not to withdraw the money during the selected period, and the interest rate remains unchanged even if market rates move.

Why Choose A Fixed Deposit?

FDs are an attractive first step for new savers because they are simple, predictable, and low-risk. You know exactly how much interest you’ll earn, there’s minimal chance of losing your money, and you can build the habit of saving without worrying about market fluctuations.

How Does A Fixed Deposit Work?

To open an FD, you deposit a lump sum with a bank and choose a term. Your money earns interest throughout this period, and when the FD matures, you receive your original deposit (the principal) plus the interest earned. 

Minimum Amount To Open A Fixed Deposit

Most Malaysian banks require a minimum deposit of RM500 to RM1,000 to open a fixed deposit. Some banks lower these requirements during promotions or for existing customers.

Islamic fixed deposits, often referred to as fixed deposit-i or commodity murabahah deposits, generally have similar minimum deposit requirements as conventional FDs.

Can You Withdraw Your Fixed Deposit Early?

Early withdrawal is allowed, but it usually results in penalties. Banks may reduce your interest earnings or cancel them entirely if you withdraw before maturity.

Penalty terms vary by bank. Some banks forfeit all earned interest, while others pay a reduced rate. It’s worth checking the bank’s terms before opening your FD.

Fixed Deposit Interest Payment Options

Banks in Malaysia offer several ways to receive FD interest:

Upon maturity: Interest is paid together with your principal at the end of the FD term. This option works best if you plan to renew your FD for another term, as the interest can be included in your new deposit.

Monthly: Interest is paid into your savings account each month, which may suit those seeking regular income.

Annually: Interest is paid once a year into a linked savings account.

Your payment option can affect your overall returns. Interest paid upon maturity allows for compounding, which means you earn interest on your interest. Monthly or annual payments prioritise regular cash flow instead.

Is A Fixed Deposit Safer Than A Savings Account?

Both fixed deposits and savings accounts in Malaysia are protected by PIDM, or Perbadanan Insurans Deposit Malaysia, for up to RM250,000 per depositor per bank.

FDs offer fixed interest rates for the duration of the term, providing certainty for your savings. Withdrawals are generally restricted until the end of the term, making FDs best suited for money you can set aside without needing immediate access.

Savings accounts, on the other hand, have variable interest rates that can change at any time. They allow withdrawals without penalty, making them more suitable for daily spending and emergencies.

What Happens When Your Fixed Deposit Matures?

When your FD matures, you generally have three options. You can withdraw the full amount including interest, renew the entire amount into a new FD at current rates, or withdraw the interest and renew only the principal. Renewing an FD is sometimes called rolling over.

Many banks automatically renew FDs if no instructions are given before maturity. Check your bank’s policy to avoid unintended renewals.

Fixed Deposit Interest Rates In Malaysia

FD interest rates vary based on deposit amount and term. Larger amounts and longer terms usually earn higher rates. At current levels, FD rates in Malaysia generally range between 2.50% and 3.80% per annum.

Rates are influenced by Bank Negara Malaysia’s Overnight Policy Rate (OPR), so changes in OPR can affect rates.

Tax On Fixed Deposit Interest

Interest earned from fixed deposits is not subject to income tax for individual depositors , making them attractive for conservative savers.

The tax exemption does not apply to companies or business entities, which may need to declare FD interest as taxable income.

Choosing The Right Fixed Deposit Term

Your FD term should match your financial needs and goals. Short-term FDs suit money you may need soon, while longer-term deposits work better for longer-term savings.

Before depositing funds into an FD, make sure you have sufficient savings in easily accessible accounts for emergencies.

Comparing Fixed Deposit Offers

When comparing FD offers, look beyond the advertised interest rate. Minimum deposit amounts, early withdrawal penalties, interest payment options, and automatic renewal policies all matter.

Promotional FD rates can bring higher returns, but conditions usually apply. Checking the fine print helps you avoid surprises.

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