Everything You Need To Know About Fixed Deposit

Table of Contents

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).

Fixed deposit interest is calculated daily, but to simplify the calculation, we will show the calculation based on months.

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

The interest earned calculated in the example above is only an approximate figure.

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.