A Fixed Deposit account or a Time Deposit account, as it is sometimes called, is a type of account that offers a fixed and guaranteed rate of return on your investment. All banks in Malaysia offer these types of accounts. Fixed deposits have offered higher rates of interest in comparison to savings accounts and this (and because they are perceived as safe) has accounted for their popularity with Malaysians, young and old. However, before you open a fixed deposit briefly run through the following few tips that we’ve put together for you:
1. PIDM protection
Make sure that the fixed deposit you are investing in is covered by PIDM insurance. Under PIDM you can enjoy separate protection of up to RM250,000 for each of the following types of accounts: conventional and Islamic deposit accounts, joint accounts, trust accounts and accounts held by sole proprietorships, partnerships, professional practices and companies. However, structured products, negotiable instruments of deposit and other bearer deposits etc are not eligible for PIDM protection.
2. Cooperative bank deposits
These products have also become popular because they pay higher interests (more than are available with standard banking deposits) for even short tenors. These deposits are not eligible for PIDM protection. But, you will enjoy protection from the Ministry of Finance under the Development of Financial Institutions Act (DAFIA).
3. FD promotions
Fixed Deposit promos are a great way of earning higher-than-standard interest. Even if you do not get higher rates you could get rewards / gifts that add value to your returns. However, there are a few things you must watch out for. These include minimum deposit requirements, penalties in case of premature withdrawal etc.
4. Partial withdrawals
Many banks do not allow premature withdrawals; even if they do so, you may get hit with penalty fees or may lose the interest earned till that date. But, you may have an actual need for this cash. Plan and go for a Fixed Deposit product that allows you to make partial withdrawals while the rest continues to earn interest.
5. Foreign currency fixed deposits
The liberalization of the Foreign Exchange Admininstrative Rules on the 01st of April 2005 has made foreign exchange products, including foreign exchange deposits popular. They are also available for very short periods of time like 7 days. Investors use them for hedging and for earning higher rates of interest than are available on standard deposits. These deposits, however, are subject to foreign exchange risk. If foreign exchange rates fall significantly you stand to lose a significant portion of your investment.