Fixed deposits (FDs) are a popular and reliable investment option in Malaysia, offering guaranteed returns and a safe place to park your money. Whether you're new to investing or looking to diversify your savings, understanding how a fixed deposit account works can help you make informed financial decisions. 

What is a Fixed Deposit?

When you open a fixed deposit account and make a fixed deposit placement, you agree to deposit a specific amount of money for a chosen tenure. During this time, your money earns a fixed interest rate, which is predetermined at the time of making a fixed deposit placement. At the end of the tenure, known as the maturity period, you receive your principal amount along with the interest earned.

The primary purpose of a fixed deposit account is to provide a safe and predictable return on your investment. Fixed deposits offer guaranteed returns and security of principal, making them an excellent choice for conservative investors. Fixed deposits also provide a steady source of interest income, making them a reliable addition to your financial savings strategy.

Key Features of Fixed Deposits

1. Fixed Interest Rates

A fixed deposit account offers a stable and predetermined interest rate that remains consistent throughout the deposit's tenure. This feature eliminates the uncertainty of fluctuating interest rates, providing you with a reliable income from your investment. The fixed rate ensures that the returns you expect at the end of the deposit period are the returns you will receive, which helps in financial planning and forecasting.
 

2. Tenure Options

Fixed deposits come with a predefined tenure, allowing you to choose the duration that aligns with your financial objectives. You can opt for short-term deposits, typically ranging from one month to less than a year, or long-term deposits that can extend up to several years. This feature enables you to plan your investment for specific financial goals, such as saving for a holiday, educational expenses, or retirement planning.

3. Minimum Deposit

Fixed deposits have a minimum amount requirement for each bank. This allows you to choose the amount that you are comfortable to lock in for your financial planning.
 

4. Safety and Security of Principal

One of the most significant features of fixed deposits is the security they offer. Your principal investment is protected, meaning the amount you deposit will not decrease over time. This makes fixed deposits one of the safest investment options, especially for risk-averse individuals.
 

5. Protected by PIDM

PIDM protects up to RM250,000 per depositor per member bank. There is separate protection for conventional and Islamic deposits held by individuals, joint owners, sole proprietorships, trustees, partnerships, and companies.

Benefits of Fixed Deposits

1. Guaranteed Returns

Fixed deposits offer guaranteed returns, as the interest income is predetermined and unaffected by market changes. This predictability makes fixed deposit accounts an excellent choice for individuals who prefer stable and consistent earnings. The guaranteed returns can help you plan your finances effectively, knowing exactly how much interest income you will earn over the tenure of the deposit.
 

2. Low Risk

Unlike more volatile investments such as stocks or mutual funds, fixed deposits carry minimal risk. The principal amount in a fixed deposit account is secure, and the agreed-upon interest rate ensures that your returns are safeguarded against market fluctuations. This low-risk profile makes fixed deposits suitable for conservative investors who prioritise capital preservation over high returns.

3. Multiple Tenure Options

Fixed deposits offer varying tenures, providing flexibility to meet different financial goals. You can choose a short-term fixed deposit for quick returns or a long-term fixed deposit for higher interest accumulation over time. This adaptability makes fixed deposits suitable for different life stages and financial needs, whether you're saving for a short-term goal like a gadget or a long-term objective like a home down payment.

How to Open a Fixed Deposit Account with Hong Leong Bank

Eligibility

• Minimum deposit of RM5,000 for 1 month placement and RM500 for 2 months and above.

• Applicable for individual and non-individual customers.

• Open to Malaysians and non-Malaysians aged 18 years old & above.

• For Malaysians aged below 18 years old, an account must be opened as a trust account.

Making a Fixed Deposit Placement

Select the Tenure and Amount: Choose the deposit amount and tenure that aligns with your financial goals. 

Eligibility: Have an existing HLB Current and/or Savings Account

You can open a fixed deposit account by visiting one of our branches or using the online banking platform for a more convenient process.

Hong Leong Bank periodically offers FD promotions in Malaysia, providing favourable interest rates or additional benefits for a limited time.

How Are Fixed Deposit Interest Rates Determined?

Fixed deposit interest rates are determined by either simple interest or compound interest. Simple interest is where the interest is calculated on the principal amount only, while compound interest is calculated on both the principal and the accumulated interest, leading to higher returns over time.

Factors to Consider Before Investing in Fixed Deposits

1. Interest Rates and Tenure

Compare different banks' fixed deposit interest rates in Malaysia and select the one that offers the best returns for your chosen tenure.
 

2. Aligning FDs with Your Savings Strategy

Ensure that the tenure and interest rate of the FD align with your overall financial plan and savings goals.
 

3. Inflation Impact

Consider the real returns on your investment after accounting for inflation. While FDs offer nominal returns, high inflation can erode purchasing power.
 

4. Penalties with Premature Withdrawal

Understand the penalties involved if you need to withdraw your FD before maturity. Banks usually do not pay interest for premature withdrawals, which can reduce your overall earnings.

Managing and Monitoring Your Fixed Deposits

Keep track of your fixed deposit accounts and their maturity dates. This ensures you can reinvest or withdraw your funds when needed. Upon maturity, you can either withdraw the funds or reinvest them in a new fixed deposit. Reinvestment options often come with the choice to roll over the principal into a new fixed deposit account, but the interest rate may not necessarily be the same.

Conclusion

Fixed deposits are a reliable and safe investment option, offering guaranteed returns and the security of principal. By understanding how they work, comparing fixed deposit interest rates in Malaysia, and taking advantage of fixed deposit promotions, you can effectively incorporate FDs into your financial plan.