A Fixed Deposit is a type of account that offers a fixed and guaranteed rate of interest on your savings or investment. Such accounts are offered by almost all banks in Malaysia.
Fixed Deposits offer significantly higher rates of interest than savings accounts while minimizing the risk associated with other high-risk investment products; this accounts for their popularity with Malaysians even today.
Here are some of the major types of Deposit Accounts in Malaysia:
Conventional Fixed Deposits
They offer a guaranteed rate of return which is based on the tenor of investment. The tenor may vary from1 month to 60 months depending upon the issuing bank and the particular product. Terms and Conditions relating to minimum deposit amount, tenor, premature withdrawal, gifts, partial withdrawal, periodicity of interest payments etc. vary from bank to bank.
Foreign Currency Fixed Deposits
These accounts allow you to open deposits in a range of foreign currencies. You can open them in Ringgit which are then converted into units of the foreign currency of your choice. These deposits have become popular since the liberalization of the Foreign Exchange Administrative Rules on the 01st of April 2005.
Islamic Fixed Deposits
Mudharabah, Murabahah and Wakalah are the main types of fixed deposit options available under Islamic Banking. The customer deposits his money with the bank for a fixed duration. The bank will invest the monies so deposited in Shariah-compliant ventures and the proceeds are divided, between the investor and the bank in it’s capacity as a manager, at a pre-agreed ratio.
Security of Fixed Deposits
In September 2005, Malaysia introduced the deposit insurance system administered by Perbadanan Insurans Deposit Malaysia (PIDM). Under this system the maximum protection given is RM250,000 per depositor per member institution (this includes both the principal amount and the interest/return on the deposit). Separate coverage is provided for both conventional and Islamic deposits. Joint accounts enjoy separate coverage from individual accounts.
PIDM protects your bank deposits and will promptly (automatically – no application is required) reimburse you on your insured deposits should a member bank fail.
Tips on Opening and Operating FD Accounts:
* Ensure that your fixed deposit is protected under the Perbadanan Insurans Deposit Malaysia (PIDM) scheme.
* Check for hidden fees & charges.
* Don’t break your agreement or access your fixed deposit before maturity to avoid break cost or penalty fee.
* Preferred/Priority bank customers get higher rates of interest especially if the amount of deposit exceeds a certain amount, say RM 500,000. Make sure that you avail such higher rates if you are a Priority customer.
* Not all Fixed Deposits are automatically renewable. So, keep a tab on your FDs’ maturity date and renew immediately to avoid interest loss.
* Always keep an alert eye out on the FDs for attractive offers.