If you wish to grow your finances or simply earn additional money for savings, a minimal-risk fixed deposit account in Singapore can be for you.
This article will take you through the fundamental structure and objective of fixed deposit account schemes, so you can decide if this investment type is right for you.
Fixed Deposit Accounts: What are they?
Fixed deposit accounts provide a semi-flexible approach to earning higher rates of return without risk. In terms of procedure, clients must first submit money to the bank for a specified period. This agreed-upon term may be as short as one week or as long as three years. However, three, six, nine, and twelve months are more usual.
Once the tenure expires, users receive their initial amounts back, plus interest computed at the rate agreed on when depositing the money. While it is possible to withdraw funds well before the end of the tenure, doing so usually entails forfeiting interest and sometimes incurring penalty fees.
Most banks in Singapore offer fixed deposit schemes, accepting even customers who are 12 years old. They do not charge any fee concerning FD accounts, making it an extremely appealing investment alternative for individuals and businesses.
Fixed Deposit Interest Rates Explained
Fixed deposits are appealing because they provide a guaranteed return at a reasonable interest rate, in contrast to alternative investments that are riskier or even have lower returns. To begin, you deposit in a fixed deposit, which has the rate of interest contracted in advance. Even if interest rates change towards the end of the duration, the account owner earns based on the interest rate agreed upon earlier.
It becomes essential as most banks offer promotional rates that frequently alter from month to month. While “board rates” stay consistent, these cycling promotions have an impact on the competitive environment of fixed deposit options. Before making any account decisions, it is best to check for the most recent deals.
Fixed interest rates are calculated yearly, regardless of whether the marketed duration is greater than or less than one year. You can determine the real return in the form of interest by multiplying the principal (SGD amount deposited) by the indicated interest rate (% p.a.) by the deposit tenure (as a fraction of 1 year). This algorithm is useful for assessing prospective revenues between bank offers.
Some private banks, like DBS, offer fixed deposit accounts in Singapore dollars and nine foreign currencies. They offer interest rates depending on the total SGD FD balances, which include existing and new placements and renewals.
Importance of Deposit Amount and Tenure
Remembering the formula for calculating interest on a deposit, the duration and amount of the deposit are important elements in driving value. Deposits kept for a long time more than 12 months yield higher interest. High promotion rates at common tenures like 3, 6, 9, and 12 months frequently overwrite.
Small deposits like S$5000-S$10,000 receive lower rates on average unless matched with long tenures like 12 months or more. It implies that the length of the deposit has a higher impact than the size of the deposit.
Fixed Deposit Accounts’ Advantages
The primary advantage of a fixed deposit is the assured return. Unlike riskier investments, when redeemed at the end of the policy term, this deposit will always yield additional interest. Foreign currency fixed deposits, for example, may appear “secure,” yet they can lose money.
Another advantage is that fixed deposits require little management compared to other savings accounts. There are usually no additional bank costs, and the interest rate remains steady. There’s also no need to keep track of minimums amounts or indulge in banking requirements to gain rewards.
Finally, liquidity is a possible benefit that may result in the loss of any income earned. It is still feasible to withdraw cash early. There are many tenure possibilities, some of which are as short as one week and require larger deposits. Singapore Dollar fixed deposit accounts have relatively low risks.