Fixed deposits are a way to earn guaranteed returns on your money that are higher than savings accounts while still being virtually risk-free. Despite the rising interest rate environment, most banks have kept the fixed deposit interest rates low, such that the interest earned on the 1-year Singapore Savings Bonds (SSB) is even higher than most fixed deposit board rates.
Thus, we’ll examine whether they still have a role to play for your investment and budgeting needs.
Read Also: 6 Investments In Singapore That Provide Guaranteed Principal And Returns
Advantages Of Fixed Deposits
Simplicity: The simplicity of fixed deposits make them popular among our parents’ generation, since you don’t need any skill, luck, or experience to make money from fixed deposits. You give your money to the bank, and they return your principal plus interest after the tenure is up.
Predictable: Fixed deposits can be interesting for investors looking to build a foundation of stable assets that guarantee their principal and returns, so they would be in a better position to make higher risk, higher return investments like stocks, properties, peer-to-peer lending, or even cryptocurrencies. Thus, they are useful for sums of money you absolutely cannot afford to lose to the fluctuations of the market, such as money set aside for renovations, education, or downpayment for a car.
Accessible: Fixed deposits can be made with sums of money as little as $500 and with maturity periods of one month to three years. Unlike instruments like SSB, where you may be allocated less than what you want to invest, especially where the bond is oversubscribed, there are no allocation limit with fixed deposits. Also, there is the maximum deposit cap on fixed deposits are much higher, unlike the SSB, which has an individual limit of $200,000.
Safe: Singapore banking consumers benefit from a tightly-regulated banking eco-system. In addition, Singapore’s Deposit Insurance Scheme insures up to $75,000 per account for deposits with all full-service banks and financial institutions.
Read Also: Best Savings Accounts In Singapore – If You Don’t Want To Keep Jumping Through Hoops
Disadvantages Of Fixed Deposits
Liquidity: Obviously, you will be giving up liquidity when you place money in a fixed deposit. This means that if you do need that money urgently before maturity, you’ll receive little or no interest. It is worth noting that the amount lost for pre-maturing redeeming your capital is marginal, compared to what you would lose for surrendering other instruments early like endowment plans.
Interest Rates: Non-promotional interest rates for fixed deposits are currently relatively low, even compared to virtually risk-free investments like SSB.
Read Also: [2022 Edition] Complete Guide To Buying Singapore Savings Bonds (SSB)
Which Bank Offers The Best Fixed Deposit Interest Rates?
This is a little tricky to determine, since banks have board rates for fixed deposits that don’t change much and promotional interest rates that can change on a regular basis. Obviously, you should take advantage of the prevailing promotional rates at the point you wish to make your fixed deposits.
The rates also differ depending on the amount of money you’re depositing. You shouldn’t commit more money just because you want to hit the next interest rate tier, but rather, consider how much you plan to set aside, and look for the bank with the best rates at your desired deposit amount.
Here is a good list of banks to get you started, listed in alphabetical order. The rates are based on a 12-month period.
| Banks | Board Rate | Promotional Rate |
| Bank of China | 1.75% (12 months) Up to $500,000 |
2.55 – 2.70% Depends Over the counter placement or mobile banking placement |
| CIMB | 0.30 – 0.35% minimum deposit of $5,000 |
4.15 – 4.20% Depends whether personal or preferred banking |
| Citibank | 0.10% minimum deposit of $10,000 |
3.40% Citigold Private Client and Citigold for minimum fresh funds of $50,000 to $3,000,000 |
| DBS | 3.20%; (0.05%) For up to $19,999 |
(nil) |
| HSBC | 0.15% minimum deposit of $5,000 |
3.20% minimum fresh funds of $30,000 to $1,200,000 |
| ICBC | 3.70 – 3.75% minimum deposit of $500 |
3.70% minimum deposit of $5,000 for over the counter and minimum deposit of $500 via e-banking |
| Maybank | 0.35% minimum deposit of $1,000 |
3.90% minimum deposit of $20,000 |
| OCBC | 0.10 – 0.20% minimum deposit of $5,000 |
3.40 – 3.90% minimum fresh funds of $5,000; rates vary between personal banking, premier banking, and premier private client |
| RHB | 0.40 – 0.55% minimum deposit of $20,000 |
3.80 – 3.90% minimum deposit of $20,000 |
| Standard Chartered | 1.35% | 3.50 – 3.80% minimum deposit of $25,000 |
| UOB | 1.50% minimum deposit of $5,000 |
3.55 – 3.95% minimum deposit of $20,000 |
Read Also: [2022 Edition] Best Savings Accounts for Working Adults in Singapore
What To Take Note Of Before Making A Fixed Deposit
After selecting the bank with whom you wish to place your money, you’ll also need to decide on the tenure (duration) you desire. In most cases, you can also decide on the renewal action after your fixed deposit reaches maturity, including automatically making a new fixed deposit with your principal and interest (rolling over), just rolling over your principal and withdrawing your interest, or withdrawing both principal and interest.
Finally, you should find out exactly what charges and fees you will incur if you withdraw your fixed deposit early and how much interest you would receive (if any at all).
Read Also: Complete Guide To Cash Management Accounts In Singapore
This article was first published on 15 November 2018 and updated to reflect the latest information.
The post Beginners’ Guide To Fixed Deposits In Singapore appeared first on DollarsAndSense.sg.
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