Different Types Of Deposit Accounts In Malaysia

Different Types of Deposit Accounts in Malaysia

Different Types of Deposit Accounts in Malaysia

Fixed deposits or time deposits are fixed interest savings products. These accounts offer a fixed and guaranteed rate of interest on the amount deposited, for a fixed tenor. Fixed deposits, in general, offer much more attractive rates of interest than standard savings accounts while their guaranteed nature provides a favourable comparison to other high-risk, high-return investment products; this accounts for the popularity they have enjoyed with generations of Malaysians. Here, we will examine some of the different types of deposit accounts in Malaysia:

Conventional Fixed Deposits

These deposits offer a guaranteed rate of return which depends upon the tenor of deposit. Tenors, generally range from 1 month to 60 months. Clauses governing the various features of deposits like minimum deposit amount, tenor, premature / partial withdrawal, periodicity of interest payments etc differ from product to product and bank to bank.

Fixed deposit interest rates range between 1% to 4% depending upon tenor. There are also promotional instances of banks offering upto 6% interest rates on fixed deposits opened during promotional periods.

Foreign Currency Fixed Deposits

These deposits can be opened in a range of foreign currencies. You can either directly deposit foreign currency or open them in Ringgit which are then converted into units of the foreign currency of your choice. These deposits were introduced following the liberalization of the Foreign Exchange Administrative Rules on the 01st of April 2005.

They are used by those who have foreign currency earnings, wish to use them for hedging, wish to invest overseas, wish to fund their children’s education overseas, have business interests outside Malaysia or wish to earn higher interest than on normal fixed deposits.

Tenor varies from 7 days to 12 months.

Interest rate earnings could potentially go up to 8%+ (as it has in the past).

Interest is paid upon maturity.

Islamic Fixed Deposits

These are Shariah-compliant deposit products. The following flavours of fixed deposits are available under Islamic banking:

Mudharabah (or profit sharing) deposits – The customer invests money with the bank for a fixed tenor. The bank as the manager or Mudarib will invest the money in Shariah-compliant ventures. The profit will be shared between the customer and the bank as per a pre-determined profit sharing ratio.

There are three types of Mudharabah Deposit contracts of which, the Mudharabah General Investment Account (MGIA) is the most popular, especially amongst individual investors.

Profit is calculated on monthly basis. Hence returns from the investment may vary from month to month.

Murabahah (profit mark-up) deposits – These deposits involve purchase and sale of assets on a cost + profit mark-up basis with the deposited money. When such contracts involve two parties they are known as Bai Al-Enah and when they involve multiple parties they are known as Tawwaruq or Commodity Murabahah. Bai Al-Enah deposits use a wide range of assets (Sharia-acceptable) excluding gold and silver while Tawwaruq Deposits use “Halal” commodities.

Profit rate is pre-determined; it may be paid upfront or on a deferred basis depending upon the tenor of the deposit.

Wakalah Deposits – They are very similar to Contracts of Agency. The bank (Wakil) will manage and invest the funds deposited by you in Shariah-compliant investment activities to deliver “expected rate of returns”.

Deposit Protection

All the above types of fixed deposits are eligible for PIDM protection upto a limit of RM250,000 per depositor per member bank.

Cooperative Bank Deposits

These are fixed deposits invested with cooperative banks. They have tended to provide higher returns (with comparatively low minimum deposit requirements) than conventional banking deposits. Unlike the above types of deposits, they are not eligible for PIDM protection; you will, however, get protection from the Ministry of Finance under the Development of Financial Institutions Act (DAFIA).

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Best Fixed Deposit Accounts To Invest In

Best fixed deposit accounts to invest in

Best fixed deposit accounts to invest in

Fixed Deposits or Time Deposits are fixed interest savings products offered by almost all banks in Malaysia. We’ve tried to put together a few tips to help you select and invest in the best fixed deposits available, appropriate for your needs:

Understand your needs – Try understanding your exact needs/requirements through the following questions:

What is your investable corpus? This is the amount that you can set aside.

What is your investable tenor? This is the period for which you invest in an FD.

What is your risk profile? Are you willing to invest in market-linked Fds? Or do you want a safe, guaranteed-return FD.

A fixed deposit involves depositing a sum of money for a fixed period of time ranging from a month to a few years. Premature withdrawals (before end of tenor) could potentially lose you all the interest earned as well as making you liable to pay a penalty (depending upon the product’s terms and conditions). So, check whether you can (i) set aside an investable corpus and (ii) for the given time period.

Zero in on the product of your choice – Though many people consider returns to be the sole factor on which to rate fixed deposits, your particular requirements may vary. Criteria like minimum deposit requirements, minimum/maximum deposit tenor, level of customer service provided at the deposit taking bank/financial institution, flexibility to make partial withdrawals, availability of overdraft against fixed deposits, automatic renewal of deposits upon maturity, auto-credit of interest earned to your CA/SA etc could impact your decision to go with a particular deposit product.

Consider alternative avenues – Fixed Deposits come in several flavours. In addition to the “conventional” deposit products there are other deposit products like Foreign Currency Fixed Deposits, Islamic Deposits and Cooperative bank deposits.

Foreign Currency Deposits have become popular as they tend to provide higher returns than conventional deposits but are subject to exchange risk. They are also popular with those who have foreign currency earnings, wish to invest overseas, have business interests outside Malaysia and/or wish to educate their children overseas.

Islamic deposits are Shariah-compliant products tool that provide “Halal” returns. 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.

Fixed deposits with cooperative banks have tended to provide high returns with comparatively low minimum deposit requirements. However, unlike conventional or Islamic FDs, they are not eligible for PIDM protection; you will, however, get protection from the Ministry of Finance under the Development of Financial Institutions Act (DAFIA).

If you are interested in high interest rates with conventional deposits consider Kids Deposits, Seniors’ Deposits and deposits accompanied by promotions.

Best Tips For Investing In Fixed Deposits

Best tips for investing in Fixed Deposits

Best tips for investing in Fixed Deposits

Fixed Deposits (FD) or Time Deposits are accounts that offer a fixed, guaranteed rate of interest for a fixed time period. Fixed Deposits have remained very popular amongst Malaysians despite the emergence of several, new investment products. Here are a few tips for making the best of your fixed deposit investments:

Understand the types of Fixed Deposits on offer – The following types of fixed deposits are offered in Malaysia: conventional, guaranteed-return Fixed Deposits, Islamic Fixed Deposits and Foreign Currency Fixed Deposits for the investor who is prepared to risk exchange rate fluctuations for higher returns. Understand the nature of each of these deposit categories and use them appropriate to your investment goals.

PIDM protection – Ensure that your Fixed Deposit investment is eligible for PIDM protection. This protection extends to all types of bank fixed deposits up to a limit of RM250,000 per depositer per member bank. If your investable corpus is more than this amount, you can still get PIDM protection for the entire sum by breaking up the sum under different accounts like joint accounts with your mother, father or spouse. Under PIDM rules such joint accounts are also eligible for separate protection up to RM 250,000 each provided that each of the joint accounts has a different set of account holders.

FD Promotions – One way of enjoying higher interest rates on your FDs is by investing through promotions. Even if you don’t get higher-than-standard interest rates you could get “value-for-money” gifts.

Kids / Senior Accounts – Kids and Seniors’ accounts generally tend to give slightly higher rates of interest on FDs. So, try and park your money in your child or parent’s name especially if it is a substantial sum and you wish to invest it for a longish period of time. The extra interest earned is not to be sneezed at.

Cooperative Bank Deposits – These provide some of the best FD interest returns available in the market. For example, a one month (minimum RM 1,000) deposit with MBSB provides 3.3% returns; the Bank Rakyat Deposits Account-i provides a return of 3.6% for a 3-month deposit with a minimum deposit of just RM 500.

The drawback is, these deposits are not eligible for PIDM protection; you will, however, get protection from the Ministry of Finance under the Development of Financial Institutions Act (DAFIA).

Very short tenors – If you are foreign exchange-savvy use Foreign Currency Fixed Deposits as they offer very short-range tenors ranging from overnight to a week or a couple of weeks. Conventional deposits are only available one month onwards.

Partial Withdrawals – Most banks levy a penalty fee on premature withdrawals and you may even lose the interest accrued. But what are you to do if you require emergency cash? Check for an FD that permits partial withdrawals.

Overdraft Facility – Another way of accessing emergency cash is through an overdraft collateralized against your FD.

Automatic deposit renewal – Wouldn’t it be nice if your FD gets automatically renewed upon maturity? Or, the profit/interest is credited to your savings or current account while the principal gets renewed. Check for an FD that allows you to “program” what happens on its maturity.

The Citibank Time Deposit allows you to make partial withdrawals in multiples of RM5,000 while the remaining balance continues to earn the original rate of interest. You also have the option of pledging your Time Deposit for an overdraft facility. And, by default, your deposit together with the interest earned is automatically renewed.

Compare Fixed Deposit Rates In Malaysia

Compare fixed deposit rates in Malaysia

Compare fixed deposit rates in Malaysia

Fixed Deposits (FD) or Time Deposits are accounts that offer a fixed, guaranteed rate of interest for a fixed time period. Fixed deposits, in general, offer much more attractive rates of interest than standard savings accounts and have hence enjoyed immense popularity with generations of Malaysians.

We will try and look at a few of the best fixed deposit accounts in Malaysia from an interest-paying perspective. But before we do that, it is important to bear in mind that there a lot more variables that affect the attractiveness of the high-interest paying fixed deposit. These could include tenor, minimum deposit amount, availability of overdraft against the fixed deposit, requirement to have a CA/SA with the bank, availability of partial withdrawals, daily or monthly interest calculation, penalties and charges applicable in case of premature withdrawal etc.

Rates may also differ for foreign currency deposits and for deposits made by senior citizens (we will not look at these deposit types in this article). Moreover, different banks keep coming up with fixed deposit promotions. You can generally get higher rates of interest through such promotions than is normally possible. But still, it is important that you check the terms and conditions of such promotions before you open an FD through these promotions.

Now is a pretty good time to invest in fixed deposits as their rates have been going up since Bank Negara raised the overnight policy rate (OPR) by 25 basis points on July 14, 2014. Ok, here is the promised selection:

Hong Leong Bank FD Promotions – You will be offered 4% p.a. for a 15 month deposit and 3.85% p.a. for a 12 month deposit. The promotional period runs from 01st July 2014 to 31st October 2014. Minimum deposit amount is RM 10,000 but you will also be required to open a Current or Savings Account with a minimum deposit of RM 1,000. 10% of the FD placement will be earmarked in the CA/SA for a period of 6 months. You will also have a shot at winning the grand prize of a corner terrace home at Emerald Rawang, Selangor.

Alliance FD Gold – This FD provides an interest rate of 3.4% for tenors ranging from 12 to 24 months with negotiable rates for higher tenors. The minimum deposit amount is RM 30,000. Interest is credited into an account of your choice monthly. You can also make partial withdrawals in multiples of RM 1,000 subject to a minimum balance maintenance of RM30,000. An overdraft facility on a 1:1 basis is also available against the Alliance FD Gold placement amount.

Citibank Time Deposit – Interest rate ranges from 2.95% over a tenor of 1/2 months to 3.10% for a tenor of 6-8 months to 3.2% for 12 months – all of which is pretty standard. You can, however, make partial withdrawals in multiples of RM5,000 while the remaining balance continues to earn the original rate of interest. You also have the option of pledging your Time Deposit for an overdraft facility. Minimum deposit – for 1 month, RM 5,000 and for 2 to 60 months, RM 1,000.

Cooperative bank deposits – You can also get excellent rates from the following banks:

1 month tenor – 3.3% with MBSB with a minimum deposit of RM 1,000.

Bank Rakyat Deposits Account-i – 3 month tenor – 3.6% with a minimum deposit of just RM 500. This deposit account also provides interest rates of 3.65% for 6 months, 3.75% for 9 months, 3.9% for 12 months, 4.4% for 60 months and 4.5% for tenors more than 60 months.

Cooperative bank deposits are not eligible for PIDM protection; you will, howver, get protection from the Ministry of Finance under the Development of Financial Institutions Act (DAFIA).

Uses Of Investing In Fixed Deposits

Uses of investing in fixed deposits

Uses of investing in fixed deposits

A fixed deposit or a term deposit or a time deposit is a financial product provided by banks that has a fixed term. A fixed deposit pays a fixed rate of interest, that is generally better than a regular savings account, until the end of the maturity term. Interest rates can vary depending upon a number of factors; these include the monetary policy of Bank Negara Malaysia, the policies of the bank issuing the deposit certificate, the amount of money invested, the term invested, age of the depositor (some deposits provide a higher rate of interest for senior citizens and for kids (“Juniors”)) etc.

In Malaysia, there are various types of fixed deposit products available; these include Conventional Fixed Deposits, Foreign Currency Fixed Deposits and Islamic Fixed Deposits. We will try and explore the uses of investing in fixed deposits:

* Fixed deposits are attractive to Malaysians as they offer a higher rate of interest than savings accounts. In addition, priority or premier banking customers may get higher rates of interest on their fixed deposits.

* Conventional fixed deposits not only provide returns guaranteed from interest rate fluctuations but also guarantee the prinicipal amount.

* Some banks even offer the flexibility of partial withdrawals before the maturity date. For instance, Citibank’s Time Deposits offer you the flexibility of making partial withdrawals in multiples of RM5,000 while the balance amount will continue to earn interest.

* Foreign Currency Deposits have become popular as they tend to provide higher returns than conventional deposits and in foreign currency but are subject to exchange risk. They are also popular with those who have foreign currency earnings, wish to invest overseas, have business interests outside Malaysia and/or wish to educate their children overseas.

* Foreign Currency Deposits also serve as a hedging tool.

* Fixed deposits can be used as a collateral for availing of overdraft facility.

* Islamic deposits provide a Shariah-compliant financial tool that provides “Halal” returns for customers who are so inclined.

* Persons in their individual and joint capacity as well as businesses, associations, clubs, trusts etc can open Fixed Deposit Accounts.

* Some banks automatically renew a deposit upon maturity; you can also choose to have the profit / interest earned credited to your savings or current account. Alternatively, you may choose to have the entire amount of the fixed deposit (both the principal and interest) credited to your savings or current account. In such a case, your fixed deposit will cease to exist.

* All types of bank fixed deposits including Islamic fixed deposits are eligible for PIDM protection upto a limit of RM250,000 per depositor per member bank.

* To ensure PIDM protection for a larger sum of money (larger than RM 250,000) than is available for a single depositor (you) is by opening joint accounts with your mother, father or spouse. Under PIDM rules such joint accounts are eligible for separate protection up to RM 250,000 each provided that each of the joint accounts has a different set of account holders.

* Many banks keep coming up with FD promotions; stay alert for such promotions as you may end up with higher interest rates than normal or with gifts that are “value-for-money”.