Ultimate Guide to Fixed Deposit
What is fixed deposit?
Sometimes it is useful to think a bit in advance.
This especially refers to education that has become an integral part of our future because it ensures higher possibilities to get a better paid job.
This doesn’t, however, only have to do with education but also with accumulating enough means for starting an independent life.
Therefore many parents decide themselves for a fixed deposit in order to help them on the way to the adulthood as much as possible.
This is a special type of bank deposit that adds a special interest rate which is paid out to the owner of the account as soon as he/she is legally an adult.
One is not obliged to do this immediately upon maturity.
The more time passes, the more money will stack up.
When the money is withdrawn before the appropriate moment, you will be penalized and the entire sum of money will be reduced.
The reduction is usually in the form of cutting down the interest you gained partially or completely.
In a situation where money has to be taken out early, don’t forget to notice the bank thirty days prior to the desired withdrawal date.
Fixed deposit in Singapore
Fixed deposit is definitely the most favorite convenience that banks provide, especially among parents.
Sometimes they tend to worry about inflation.
It has been immovable for the past ten years (1.9%), but some banks go out of their way to gain trust of the customers and offer a shockingly low inflation rate of 0.005%.
Singaporeans have a trend of choosing a fixed deposit with no liquidity in order to beat inflation although they are initially offered by banks the choice to liquidate their deposit at a lower interest rate.
But why do they usually prefer this type of putting the money aside than the savings account?
It is true, that the tenure that can last anywhere between a month to twelve months can seem a bit off-putting as you will not be able to profit immediately.
Long tenure, however, means raised interest rate and eventually bigger monetary gain, which is not the case with ordinary savings accounts whose interest rate is stagnant despite the tenure length.
Foreign currency deposit may additionally benefit you because banks offer better interest rates in these conditions.
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Who is eligible for the fixed deposit rate?
Right of the bat, we can say that there are no extremely tight constraints on who can qualify for the fixed deposit.
In terms of age, banks will usually require that you are at least eighteen years old.
Many banks allow children as early as at the age of twelve to do it but they will need their parents as their guarantors.
Nationality-wise, both Singaporeans and foreigners are welcome to apply for the process.
Multiple placement periods
When it comes to the fixed deposit, time is money in all of its meaning.
The more time passes before you withdraw your money the richer you will get.
This comes from the fact that the interest rate gets exponentially higher as the time passes.
Different banks offer different tenure periods, and if you are to check with your bank about the terms considering this issue.
The overall span of the tenure period offered by Singaporean banks is between three months to as much as two years, but there are instances where it lasts for only a month.
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How to choose a bank?
This is quite a complex question, and we could say that it is almost the same as the everlasting dilemma of how to find a soulmate.
There are so many factors that you have to investigate, and the quest for the right bank can certainly turn out as complicated as finding the right life partner.
Indeed, the choice of bank that you make will follow you throughout your whole life and therefore you have to choose smart.
The bank has to fit your current financial power, to follow your your pace of achieving your life goals and most importantly, there must be trust between you and your bank.
Firstly you have to take a look at the minimum deposit you’ll need to give.
Generally speaking, the minimum amount of money that should be paid on the spot is $1,000, but some of them will ask for $5,000.
What you have to be careful about are the banks that try to lure the customers in by advertising fixed deposits at high interest rates but conveniently skip to mention that their minimum deposit you have to give is ridiculously high.
These are usually advertisements for special weekly or monthly offers that the banks provide the customers with.
You are, of course, warmly recommended to dig deep into the Internet and see what the banks have on their “menu” but make sure you are informed well.
Be especially cautious about the duration of the special offer and whether it is subject to any changes.
Check the conditions of early money withdrawal.
You may want to choose a bank that will not take all the interest that has piled up.
If the bank will spare at least half of the interest money, it is a bargain!
You should also inquire about the way they pay out the money.
Banks have different rhythms of the payout – some of them do it quarterly, some twice a year, and others do it yearly.
Think well about how often you’ll need the money and decide yourself for a bank that can live up to the pace of payment you need.
Last, but not least, be sure to read in great detail about the biography of the bank, so that you know they are responsible and don’t have any disputable situations or scandals in their history.
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What do I need to open the deposit account?
We already mentioned who can open a fixed deposit account, but we also have to discuss the documents you need for this process.
When you are a Singaporean or a PR, then all you need is your NRIC.
When you are a foreigner in this country, the amount of documents needed is a bit heftier.
In addition to your passport, you are also required to enclose your Working Pass, Student Pass, or an S-Pass.
To prove your place of residence you will need your bank statement, phone bill, CPF contribution history statement and the residential address.
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What is the best fixed deposit interest rate in Singapore?
This is also a question that never has a definite and accurate answer.
Something changes on a daily basis when it comes to the fixed deposit and you have to keep an eye on their sites and see how the interest rates behave.
Although this is a pretty volatile factor, here we chose ten best interest rates that are currently offer by Singaporean banks.
On a general note, the average interest rate ranges from 1.10% to 1.85%.
This is an increase of 0.75% that greatly depends on the tenure that the banks give.
The most obvious rise, of course , is when there is a 24 month tenure.
You will also notice that the most frequent tenures offered are the 6 and 12-month ones.
The interest rate for these tenures fluctuates from 1.20% to 1.75 per cent, which is not so had at all when we know that this is what some banks offer for even lengthier tenures.
The last point we will need to discuss is the minimum placement amount.
It finds itself in a span between $20,000 to 1,000,000 but it we have to mark that the upper limit is a consequence of the banks giving you a choice of the minimum fixed deposit that ranges from a particular lowest amount to the aforementioned biggest one.
CIMB (Branch) offers offers tenures of 3, 6 and twelve months.
This is quite a nice span of options for both of those who would like to gain money as soon as possible and for those who think in long-term and want to earn more with some patience.
The interest rates raise by around 10% with each type of tenures, each of them, being 1.30%, 1.45% and 1.55% (respectively).
The initial fixed deposit is reasonable- $20,00.
In combination with the great interest rate rate, even a person with average salary is able to afford and in the end significantly profit.
CIMB also gives you an option that you open your fixed deposit account online.
Interestingly, this way you can earn even more.
The lowest interest rate for a three-month tenure is now 1.40%, 1.55% for a six-month tenure and 1.75% for the twelve-month tenure.
HL Bank asks for a minimum of $50,000 to open the fixed deposit account.
With them, your money will be locked anywhere between 12 months and 24 months.
The waiting will pay off because the the interest rate is 1.75% for the 12-month tenure and 1.85% for the 24-month tenure.
This is an awesome haggle because the interest rate will make up for a bit pricier minimum placement that you have to invest.
Hong Leong Finance is the next bank whose fixed deposit we want to discuss.
They offer 4 types of tenures, a 6-month, an 8-month, a 12-month and a 24-month one.
The interest rates range from 1.10% to 1.40% which is a surge of 0.30% if you are up for waiting for 2 years before your ‘treasure’ starts getting larger.
What we especially find good about the offer is that they are extremely flexible.
In addition to a respectable range of tenures, is that they allow a minimum fixed deposit between 30,000 and 50,000 which in combination with a relatively good interest rate is perfectly tailored to slowly but surely mount up quite some cash for a secure future.
HSBC offers two programmes when it comes to the fixed deposit account.
Those are Advanced and Premium fixed deposit account for which you will need at least $30,000.
For both of them they have three and six-month tenures which goes along with what is regularly offered on the market.
What we like the best about their fixed deposit is that the interest rate for the six-month tenure rises by 0.15% (1.30% to 1.45%) when you take the three-month tenure from the Premium account.
This is a very competitive offer in our opinion.
ICBC has pretty clean and straight-out ward conditions when it comes to their fixed deposit account.
You have to cash in a minimum of $20,000 and wait for a year before the sun starts going up by 1.80%.
Although this offer doesn’t need to much space to think and chose, it is a superb offer because it guarantees you a tremendous gain.
Moreover, the above-mentioned 1.80% to 1.85% gets higher when you open the account online!
Maybank has somewhat similar offer.
They will open a fixed deposit account for minimum $30,000 on a 12-month tenure and at the interest rate of 1,75%.
RHB also looked to make their fixed de-6s5t account both affordable and beneficial.
The minimum you can invest is $50,000.
The tenures are variable, and so you have a 6-month, 7-month and 18-month tenure with an 1.40%, 1.65% and 1.80% respectively.
The length of their tenures is pretty interesting when we have in mind that others usually offer tenures in trimesters or yearly.
The interest rate is also rather attractive and has a quite an impressive increase between the shortest and the longest tenure.
SBI Singapore is also among one of the most appealing banks in which you can open the fixed deposit account.
They have a 7-month, 12-month and a 24-month tenure during which you can lock in the minimum of between $10,000-$49,999.
The interest rate is 1.40%, 1.55%, and 1.65%.
The offer is rather nice with a solid increase in the interest rate with the prolongation of the tenure.
What is more interesting, however, is that they will give you a higher interest rate by 0,10% if you invest between $50,000 – $1,000,000 – just one dollar difference!
Sing Investment & Finance offers you a fixed deposit account at an interest rate of 1.60% and 1.65 for a minimum of $50,000.
The tenure is 12 and 20 months, quite acceptable when we weigh it together with the interest rate.
This is a strong challenge to the competition on the market and we think you’ll see a sizable turn-out.
POSB/DBS has quite an outstanding offer.
For anything under $250,000 they will give you an interest rate of 1.65% on a 7-month tenure.
CIMB is, according to us, the winner of this rat-race.
The reason is quite simple – they give you room to chose.
Not only can you chose between different tenures but you will quite some money income when you chose the 24-month tenure and you can even go a step further and make the account online and enlarge your gain.
The offer is quite versatile, yet standard, something customers can easily work with and expect.
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What is the minimum amount you can deposit?
In the previous section we discussed some average deposits and their corresponding interest rates.
As we could see, none of them went under $10,000.
However, if you are, for example, young and want to start on your own and your parents couldn’t finance the fixed deposit, than even this can be rather impossible to achieve.
Is there anything lower?
Our response is, YES!
The lowest price for the the fixed deposit account is $1,000.
There is quite some number of banks that offer such a price such as ICBC bank that offers a 0.3 interest rate already on one month tenure for a minimum deposit of $500-$1,00.
Currently, they have a special offer that allows you to invest just $5,000 and they an interest rate of 2.1% if you chose the 12-month tenure!
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Is there any penalty if I try to withdraw before maturity?
Money is frivolous and one day you may be affluent and on the other you may be surviving on the brink of poverty.
Such a circumstances take drastic measures to be taken.
For example, you may have to take the money out of the bank before the right time.
The following issue we will talk about, of course, doesn’t need to happen only in such an extreme situation, you may just want to change the bank.
No matter what the reason is, taking out the money you put into your fixers deposit account, unfortunately, does have repercussions.
One of them is that you will lose the entire interest money you have gained.
It may also happen that you lose it just partially, and this totally depends on the bank’s policy.
If you were saving money in foreign currency, the situation is even gloomier as you may get back less than you put in.
What happens after my fixed term is up?
The response to the question is pretty simple – enjoy the money!
Nevertheless, there are some other options if you want to continue saving the money.
You can take the money gained by the interest rate of just rollover all the money you have in your fixed deposit account and continue earning.
It is important to communicate with your bank even before the maturity about what you want to do with the money because if you don’t, they will renew the fixed deposit for the equal period at the current market rate for a deposit of that amount and time period.
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How do I get my deposit back after the time period is up?
There are a few simple options you have:
- pick the money up at the branch itself or the cheque of you wanted to have the money in that form
- ask them to send you the check via e-mail
- require transfer to your account
- require transfer to someone else’s account
Can I top-up the fixed deposit account?
You initially may have invested the minimum amount of money but then had a change of heart and wanted to add a bit more?
Well, before you open the fixed deposit account you have to think through very well how much you want to put in because there is no possibility of topping it up.
However, what you can do is to open a new fixed deposit account with the additional amount of money you wanted to profit on!
How does that bank calculate the interest return on a fixed deposit?
Someone would think that this sort of ‘banking’ takes some sort of higher mathematics.
Therefore many people don’t even try to think about how much they will earn until they get the money because they put it aside just to have a peaceful mind when they are old.
Actually, predicting how much you will gain with the fixed deposit is not hard at all and all it takes is simple multiplying.
The deposited money should be multiplied by the interest rate and then by the amount of time your cash has been sitting in the bank – and that’s it!
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Pros and cons of a fixed deposit
Here, we will sum some of the advantages and setbacks when it comes to the fixed deposit.
You’ll be able to notice that avfixed deposit brings some risk wkth it which you have to take into consideration.
The biggest advantage of a fixed deposit is in its liquidity. With small amount of money invested you can double the gain by even just after a month.
This sort of saving your money bears no risks with itself and the return of money is secured.
In case that anything happens you can still have it insured by the Singapre Deposit Insurance Corporation.
On the other hand, the downfall is that you can’t withdraw money before maturity.
This means you can’t do anything with it during the tenure that you set with the bank.
Also, there is a risk of losing the interest when you take the money out earlier than planned.
Why choose a fixed deposit?
The section before showed just some of the reasons to opt for a fixed deposit.
Besides being flexible and attainable in terms of money, it hides a few more aces under the sleeve.
Firstly, if the currency is foreign it will get you some extra dollars.
Finally, the interest money can be used a collateral when you are applying for an overdraft facility giving you the bedge with a good rate.
Fixed deposit VS savings account
These two types of saving money are often the topic of many debates.
Customers ask themselves which one is better in terms of gaining money and security.
Here are some of our notes when it comes to the 2.
A fixed deposit has a score more because you can gain much more than with the savings account.
This is due to the interest rate that can be increased with the longer tenure periods.
Then, there is a difference how currency is used.
With the fixed deposit, foreign currency will work in your favour while you can’t even make a savings account with foreign currency investment.
However, we can say that savings account beats the fixed deposit in terms of liquidity because it is not bound by any fixed terms within which you are allowed to get the money.
Therefore, there is no risk of losing the money due to premature withdrawal.
Finally we have to note one last difference in the way the money is paid out – with the savings account it goes monthly while with the fixed deposit it is usually quarterly or annually.
This last variation is vital to notice when you want to set a certain pace to your savings, and it depends on when you are planning to use the money.