What are Fixed Deposits
Fixed deposit (FD) is a personal investment instrument where an amount of money is given to a bank, financial institution or an organization where the recipient pays interest to the depositor at a specified percentage for the time that the money stays with the receiving party. The rate of interest paid for fixed deposit varies based on amount, time period and from bank to bank. When the time period of the deposit, lapses the total amount along with the interest is paid in full back to the investor.
Benefits of Fixed Deposits
The main benefits of fixed deposit investment in Malaysia include:
- Fixed deposits, worldwide are considered as a safe haven for investors because it does not have any risk factors except rate of inflation and the long term factor.
- It guarantees a high return, because the bank has to pay you back the interest for depositing the money with them.
- There are also extremely easy to manage as you can transfer the money from your account automatically whenever payable.
- The interest rates are also competitive as they are offered by several banks and financial institutions in Malaysia and they are always competing in the FD sector.
- People who open fixed deposit accounts and use other products such as credit cards or loans from the banks are often rewarded in their FD account.
- The depositor is given a fixed deposit receipt, which depositor has to produce at the time of maturity. The deposit can be renewed for a further period. Hence renewability is also not a hassle if you wish for continued returns.
- Returns are also much higher than interest earned from a savings account in a bank.
Eligibility For a Fixed Deposit Account
Here are the most basic requirements to open a fixed deposit account in Malaysia:
- The applicant should be a resident or national of Malaysia.
- Her or she must be at least 18 years of age to open an FD account.
- He or she must have the required documents:
How To Open a Fixed Deposit Account
Here are following steps to open a fixed deposit account:
- You need to prepare the MyKad for identification,although there might be further documents necessary for the application based on the bank’s discretion such as proof of salary or income.
- The initial minimum deposit starts from RM1,000 for a month or RM 5,000 for 2 months and over and hence needs to be ready in the form of cash, direct cash transfer, or cheque for the new FD account.
- Fill in the application form along with required documents and submit at the bank branch with the deposit account to open your FD account.
- Once you sign up for the FD account, you will be given a issued certificate or statement of proof for the FD account. Store it carefully. If you lose your certificate, there are provisions to have it re issued to you for some extra charges.
- The certificate will have the following details:
- Principal Amount of deposit
- Placement Period
- Agreed interest Rate
- Date of Maturity
Calculation of Fixed Deposit Returns
Fixed deposits may be calculated in various forms of ways but the most common ones include annual , weekly, monthly, daily or continuous compound. The calculation have different formulas and hence provide different amounts of interest. Continuous compound and daily compound which are generally the ones with higher yields. It is also important to remember that long term FDs have higher rate of interest paid but are also subject to inflation at the time of maturity.
Fixed Deposits FAQs
Who Should opt for Fixed Deposits?
People who wish to get high returns over a period of time with minimal risk, at the same time are willing to pay large sums of money, which will be returned only after maturity.
What is the placement period for FD accounts?
It has to be deposited for a fixed period of time depending on the plan and once the period is over or reaches maturity, principal and interest amount will be paid out to the account holder.
What is the Minimum Deposit Amount necessary for an FD account?
For the initial payment a minimum of RM 1,000 per month or RM 5,000 is payable every 2 months.
What is the best way to choose a FD plan for an individual?
It is best to choose plans with promotional offers as they have higher rate of interest paid to their customers. Often banks reward loyal customer who open an FD account and also availa other financial services from the same bank.
In the case of fixed deposits, what is the alternative for fixed deposits that do not violate the Islamic banking practices?
Mudharabah General Investment Accounts or GIA accounts are an alternative Islamic banking options who wish to stick to Islamic banking laws and at the same time wish to reap the benefits of a FD account.
Useful Fixed Deposit Articles
- What are Fixed Deposits?
- 5 Year Fixed Deposits
- Advantages and Disadvantages of Fixed Deposits
- Calculation of Fixed Deposits
- Fixed Deposit Vs Term Deposit
- Fixed Deposit Rates for One Year
- Fixed Deposit Accounts for Senior Citizens in Malaysia
- Fixed Deposit Promotions
- Foreign Currency Fixed Deposit
- Overdraft facility against Fixed Deposit