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Fixed Deposit - What You Need To Know

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Despite their simplicity, some fixed deposit offerings come with a range of features. Below, we discuss some of the common features that you may come across when you compare fixed deposits offered by banks in Malaysia.

Frequency of Interest Payment

This refers to when interest on your fixed deposit is calculated and paid.

The most common option is interest paid at maturity (i.e. at the end of the agreed period) for short-term fixed deposits, and interest paid annually (i.e. yearly) for long-term fixed deposits. Some other common options may include:
  • Annual payment: interest is paid at the end of every year
  • Semi-annual payment: interest is paid at the end of every six months
  • Quarterly payment: interest is paid at the end of every four months
  • Monthly payment: interest is paid at the end of every month
  • Fortnightly payment: interest is paid at the end of every two weeks
  • Weekly payment: interest is paid at the end of every week
  • At maturity payment: interest is paid at the end of the fixed deposit term

Fixed Deposit Interest Calculation

In Malaysia, banks normally quote an annual interest rate for fixed deposits. For example, the interest rate of a 3 month fixed deposit may be quoted as 3.05% p.a. (p.a. is also known as per annum or per year).

This means, for a RM10,000 investment, the total interest earned on this particular fixed deposit investment is:

RM10,000 x 3.05% x (3 months / 12 months) = RM76.25

Auto Rollover or Renewal

If your fixed deposit account has an auto rollover or renewal facility, the bank will automatically reinvest your money (which may include any interest earned) into a new fixed deposit investment once the old investment reaches maturity.

The new fixed deposit investment will automatically be rolled over for the same term, but the interest rate may not necessarily be the same as the previous investment.

It is often advisable to put a reminder in your diary to compare fixed deposit rates before your term ends. To disable the auto rollover or renewal option, all you need to do is notify your bank of your intentions before the maturity of your fixed deposit investment.


ABOUT THE AUTHOR: CHING WEI LEE
Ching Wei Lee Ching is the CEO and co-founder of iMoney, a leading price comparison website in Malaysia. Prior to iMoney, he was an investment consultant, advising clients ranging from $5 million to $500 million on investment related matters. He is also a CFA & CAIA Charterholder, two prestigious professional qualifications in the finance field. Are you ready to open a fixed deposit in Malaysia? Simply compare fixed deposit interest rates!

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