How do Fixed Deposits work?

Hi Eman,

Fixed deposits work because the bank loans money (principal) to another lender at a higher interest rate. But in order to get access to the principal, they have to get it from lenders themselves, which happens to be you.

As an example, you place $10K in a FD. The bank takes this and lends it out to someone else for a year, charging an interest of 1.5%. In exchange, they award you 1% on the FD you place with them after the completion of a year, and make money off the difference.

I'd recommend that you look at accounts such as SCB JumpStart, Singlife, or similar, if you wish to have your money accessible, but not earning the paltry interest given in most bank accounts.

Hello there! Generally, fixed deposit earns more interest rate return per year relatively to your bank account. Depending on which bank you choose, the interest return will be make known to you base on your initial capital and your ideal time frame (12 to 24 months). You can withdraw your fixed deposit any time before the maturity date, but you will recieve lesser to no interest payment depending on the bank guideline. Given that the SGD denominated fixed deposit interest rates are generally low ( < 1.5%), you might want to consider putting your money with Singlife which can earn you a 2.5% non guaranteed return.