A Beginner’s Guide to Fixed Deposits in Singapore

Key Takeaways

• 1. Fixed deposits offer higher interest rates but lower liquidity than ordinary savings accounts.
• 2. All things considered, fixed deposits are still a safe and reliable way to earn decent returns on one’s savings.
• 3. Take advantage of existing high-interest rates of fixed deposits in Singapore.

Fixed Deposits in Singapore

For many of us, our first paycheque brings a sense of excitement and empowerment. Not only because of the greater financial freedom it represents, but what it means for our wealth-building journey.

Of the many possibilities to save, grow and invest your money in Singapore, one financial product up for consideration is something called fixed deposits.

Bookmark this article, as we give you an introduction to what fixed deposits are and how they may help to grow your money as you take the first steps toward financial independence.

What is a fixed deposit and how does it work?

A fixed deposit, also known as a time deposit, refers to a sum of money you put with a bank for a fixed period of time. Here are three terms associated with fixed deposits in Singapore:

• Principal: Original sum of money you deposit in the fixed deposit account
• Tenure: How long your money has to stay in the bank
• Interest rate: How much the bank has to pay you, on top of the principal, in return for putting your money with them. This is usually expressed in a percentage value per annum.

You and your bank agree on the principal, tenure and interest rate before starting on a fixed deposit account. Unlike an ordinary savings account, which usually allows you to deposit and withdraw any amount at any time, you may only withdraw your funds at the completion of your term period. An administrative fee or withdrawal charge may be imposed for termination of time deposits prior to maturity date.

In return, a fixed deposit account often offers an attractive interest rate.

Say you have S$10,000 on hand. Here’s how putting it in a fixed deposit vs an ordinary savings account could look like:

Note: The interest rates set out in this table are for illustration purposes only and may vary among financial institutions and the products offered.

If you have cash to spare for a foreseeable length of time, a fixed deposit account offers better value than keeping cash in an ordinary savings account with a lower interest rate.

Pros and cons of a fixed deposit

That said, as for all things money, one should consider the caveats alongside the benefits of a fixed deposit, as illustrated below:

How it can help to grow your money

• Between 2000 and 2020, the annual average interest rates for fixed deposits in Singapore ranged from 0.13% to 1.7%. In the same period, an ordinary savings account fetched an average of 1.28% to 0.09% annually¹.
• The higher interest rate is also fixed throughout the tenure, which offers stability and predictability for your return.
• A degree of flexibility comes from the wide range of tenures available, from as short as 1 week to 5 years. Though durations of 3, 6, 9, 12 and 18 months are more common.
• Compared to other investments, a fixed deposit carries low risk in Singapore. Banking consumers here benefit from a tightly-regulated banking ecosystem by the Monetary Authority of Singapore (MAS).

All banks and finance companies are also part of the Deposit Insurance Scheme, which protects deposits of up to S$75,000 per depositor per bank.

• Fixed deposits are simple to understand. There are no specific financial knowledge, skills or tools required, nor complex jargon to grasp.

What to look out for

• The biggest bugbear with fixed deposits is often their limited liquidity. You cannot withdraw the money until the end of a tenure.
• Frequently, there would be multiple fixed deposit promotions from different providers. Choice overload means you could be spending more time and effort than necessary to decide which bank to go for.
• Fixed deposit’s interest rates during non-promotional times may be lower than similarly low-risk but more liquid investments like Singapore Savings Bonds (SSBs).

What are the latest interest rates for fixed deposits in Singapore?

As fixed deposits are a trending topic, you might have come across board rates and promotional rates. What is the difference?

Simply put, the former are base interest rates. Promotional rates are what banks roll out from time to time to attract more customers.

Since October 2022, such promotional rates have hit heights unseen since the 1990s, reflecting the broader inflation and interest rate environment².

What happens when a tenure ends?

A fixed deposit reaches maturity at the end of the tenure. Most banks would offer you the following options:

• a. Withdraw both the principal plus interest earned and close the fixed deposit
• b. Withdraw only the interest and roll over the principal under a new tenure.
• c. Roll over both the principal and interest under a new tenure.

If you have no urgent cashflow needs and the new tenure offers an attractive enough interest rate, options b and c could help save the hassle of comparing and switching to another bank.

What if you want the money back early?

More often than not, an early withdrawal of a fixed deposit before it matures leads to a partial or full loss of interest. Your principal remains intact.

If you sign up for a promotional interest rate, any prorated interest upon premature cash-out may be based on the base rate instead.

Nonetheless, make sure to check the terms of a fixed deposit carefully as some banks may impose a small early withdrawal penalty.

How to apply for a fixed deposit account

You can open a fixed deposit account with local banks and licensed financial institutions, many of whom offer online or in-person application at their branches. There are usually no account opening or administrative fees.

Eligibility criteria are very similar to ordinary savings accounts, such as a minimum age of 18.

Prepare the following documents beforehand:

• NRIC for Singapore citizens and Permanent Residents.
• Passport and a valid pass, e.g., an employment or student pass for foreigners.

Any other documents that show your residential address, e.g., phone bills, bank statements.

Make your money work harder with a fixed deposit account in Singapore

Many consider fixed deposits as a bread and butter of their savings plan and it’s not hard to see why. With a mix of security and relatively high returns, they are a sensible and reliable way to grow one’s savings in Singapore.

Sign up for Citibank’s SGD Time Deposit Promotion with attractive interest rates (Terms and Conditions apply).

Sources

• 1. Monetary Authority of Singapore (n.d.) Interest Rates of Banks and Finance Companies. Retrieved March 20, 2023, from https://eservices.mas.gov.sg/Statistics/msb/InterestRatesOfBanksAndFinanceCompanies.aspx
• 2. Ching, N., & Koh, J. (2022, September 8). Singapore’s Highest Deposit Rates in 24 Years Spark Waits. Bloomberg. Retrieved March 20, 2023, from https://www.bloomberg.com/news/articles/2022-09-08/long-waits-in-singapore-for-highest-deposit-rates-in-24-years?leadSource=uverify%20wall.

Disclaimers

Deposit Insurance Scheme

Singapore dollar deposits of non-bank depositors are insured by the Singapore Deposit Insurance Corporation, for up to S$100,000 in aggregate per depositor per Scheme member by law. Foreign currency deposits, dual currency investments, structured deposits and other investment products are not insured. For more information please refer to SDIC's website at www.sdic.org.sg.

An administrative fee or withdrawal charge may be imposed for termination of time deposits prior to maturity date. No pre-termination of the time deposit is allowed for CNH and ZAR currency.

This article is for general information only and is not intended to be a forecast of future events nor a guarantee of future results and should not be relied upon as financial advice. All views and opinions are as of the date hereof, and are subject to change based on market and other conditions without notice. The article has no regard to the specific objectives, financial situation and particular needs of any specific person. It is neither an offer nor a solicitation to purchase, nor endorsement or recommendation of any products or services mentioned therein, and the products or services mentioned may or may not be offered by Citibank Singapore Limited, its related entities and their respective directors, agents and employees (together "Citigroup").

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