A Fixed Deposit is a type of account that offers a fixed and guaranteed rate of interest on your
savings or investment. Let us look at how you could possibly go about finding and investing in a fixed deposit product best suited to your requirements:
Understand the types of FD products on offer
There are different types of fixed deposits available. These include standard fixed deposits that offer a guaranteed rate of return, Islamic fixed deposits that do not offer interest but invest the deposited money in Shariah-compliant ventures and divide the proceeds between you, the investor and the bank in a pre-agreed ratio and foreign currency FDs that could potentially provide higher returns but are subject to exchange rate risks.
Moreover, banks issue fixed deposit products with their own “tweaks”. For instance, the AmBank Interest Plus is a short term investment that is a combination of a fixed deposit and unit trust investment. Make sure that you thoroughly understand the pros and cons of such products before investing in them.
If interest is the be-all and end-all…
If all that you are interested in is in interest, then here are a few options (we’ve already mentioned foreign exchange deposits above):
Senior Citizen deposits – These deposits provide slightly higher rates of return than on standard deposits. You could try placing your investments in either of your parent’s names to enjoy these additional returns.
Cooperative bank deposits – Cooperative deposits enjoy the reputation of providing some of the best FD returns in the market and for short tenors as well. For instance, the Term Deposit Account-i from Bank Rakyat provides a return of 3.7% for a period of 3 months. And, the minimum deposit requirement is just RM500. These deposits do not qualify for PIDM protection but are protected under DAFIA.
If you want some flexibility…
Premature withdrawals are usually subject to withdrawal penalties and/or loss of the interest earned. You may want a fixed deposit that permits you to withdraw money while still earning interest on the remaining corpus.
Or, how about an overdraft (OD) facility against your fixed deposit? Such a facility has a number of advantages: you can meet emergency cash flow requirements without having to break your deposit and since this is a secured OD you may incur lesser finance charges while your fixed deposit continues to earn interest for you.
Automatic renewal is another feature that makes FD management so much easier. Search for an FD that gets automatically renewed at maturity. Or, an FD that pays the profit/interest to your current or savings account while the principal gets renewed.
An FD product loaded with flexible features is the Citibank Time Deposit. It permits you to withdraw in multiples of RM5,000 while the balance continues to earn interest at the original rate. You can also pledge your time deposit against an overdraft. And, by default, your deposit with the earned interest is automatically renewed.