Are there advantages in having a fixed deposit account and a savings account? Why do some people put money into a FD account, instead of say, putting everything into a savings account (e.g. DBS Multiplier)? - Seedly

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Asked by Ivan Lee

Asked on 04 Sep 2018

Are there advantages in having a fixed deposit account and a savings account? Why do some people put money into a FD account, instead of say, putting everything into a savings account (e.g. DBS Multiplier)?

Would like to understand if having a FD account grants some form of interest rate that is more attractive as compared to savings accounts these days - thanks!

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Lok Yang Teng
Lok Yang Teng
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Top Contributor (Jan)

Level 6. Master
Updated on 07 Jun 2019

Fixed deposit(FD) also known as time deposit is when you lock a sum of money with an entity(government, coporations, banks) in exchange for higher interest rates than what savings account offer.

Disadvantage of FD: Illiquid, your money is locked until its maturity. If you choose to withdraw before the maturity date, you will not receive the interest and may inccur transaction fees.

Advantage of FD: Higher interest rates than what common savings account offer

Disadvantage of savings account: Lower interest rates than FD

Advantage of savings account: You can choose to withdraw your money anytime without constraints and inccuring extra charges for any uses.

You should put only a portion of your money into FD since you may not be able to touch the money within the next few years (usually 5-10 years).

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Ivan Lee
Ivan Lee

04 Sep 2018

Thanks for the comparison! But please help me to understand - when you mention lower interest rates for savings accounts (compared to FD), is this still the case? I'm looking at DBSM, OCBC360, interest rates on these accounts look very attractive.
Lok Yang Teng
Lok Yang Teng

04 Sep 2018

For normal savings account, interest rates are usually 0.05% per annum. Savings account like OCBC 360, DBS Multiplier also have base interest of 0.05% per annum, but have certain criterias which can allow you to increase the percentage (up to 4% or more). However, there are several limitations. 1) For OCBC, one criteria is to have minimum monthly average daily balance of S$200,000. The Deposit Insurance Scheme (DIS) is only up to $75,000. Meaning that if the bank is to lose all your $200,000 (in an unlikely scenario), you will only get back $75,000. 2) Not everyone is able to fulfill all the criteria like in DBS Multiplier, bonus addition interest rate of 3.5% is only given for 2nd salary credit of S$30,000 and above. For a layman, FD would be a more practical way to go unless able to fulfill most of the criteria.

Both instruments serve different purposes. FDs incentive you to leave the money locked in for a selected period of time for a pre-determined interest rate, whereas savings account typically give lower interest rates but are definitely more flexible when it comes to movement of funds.

It'll also depend on the savings account used. Some like DBS multiplier or OCBC 365 may give higher interest as compared to a FD, but there are conditions to be fulfilled. Some like CIMB Fastsaver or Citibank's Maxigain account gives straight up higher base interest for just leaving the funds untouched. The latter may potentially give more than 2% p.a after a year once the 12 bonus monthly counters are in.

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If you can't meet multiplier categories for higher interest e.g.being a student, NSF. You can actually go for FD instead for higher interest rates and shorter tenure. Typically standard savings account are 0.05% Base interest. There are much more higher ones out there like fastsaver, maxigain. But it's around 1.25%. Say the recent CIMB FD online promotional rates are up to 1.80%++.

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Ck Chai
Ck Chai

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Level 4. Prodigy
Answered on 17 Sep 2018

Pros of FD:

  • FD offers better interest rates than the normal saving accounts.
  • FD does not require the need to fulfil min. 2~3 criterias to enjoy better rates in High Yield Savings e.g. DBS Muiltiplier / UOB one / OCBC 360.

Cons of FD:

  • Usually has a locked down period of 12 / 24 months with a min. amount, esp during promo int rate period
  • loses some interest if withdraw before maturity, and depending on when you withdraw

Pros of High Yield Savings:

  • More flexibility in terms of withdrawal

Cons of High Yield Savings:

  • Need to fulfil min. 2~3 criterias to enjoy high interest and some of the High Yield Savings A/C require a min. spending on credit cards
  • Usually there will be a cap to the max of savings that can enjoy the high interest, e.g. DBS Multiplier capped at 50K

Depending on individual's situation, some don't mind putting money into FD if they foresee there's is no need to touch the $ for time being. Others who prefer more flexibility may either opt for High Yield Savings A/C, SSB or CIMB Fastsaver.

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FD: Some kept into for higher than normal savings a/c interest and able to being lock at least for 12 months for decent interest.

High interest savings (eg. DBS-M): These days i think these are more popular, easy to fulfill the conditions of 2 (credit salary and credit card) and get higher interst savings, with immediate liquidity except need to maintain min 3k savings.

Personally, i see DBS-M or CIMB savings account a better choice due to it's immediate liquidity. If i want higher interest and don't mind being lock up for 12 months, i wil rather go for SSB.

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Good Day Every Day
Good Day Every Day
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Level 6. Master
Answered on 16 Sep 2018

Only advantage is higher interest rates even though fixed deposits are less liquid than saving accounts.

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Gabriel Lee
Gabriel Lee
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Level 6. Master
Answered on 16 Sep 2018

Sometimes, fixed deposits offer higher interest than normal savings accounts. For example, for someone who doesn't meet the salary credit or minimum spending for a higher interest savings account like DBS Multiplier (NSFs/students). In my case, I'm currently an NSF and using CIMB Fastsaver for my life savings to earn 1% interest with no requirements (Closed my POSBkids account). Recently, I opened a fixed deposit account with CIMB as they are offering 1.84% interest for locking in my funds for 12 months. Also, I do not need these funds anytime soon which explains why I'm willing to lock it in to earn the higher interest. You can check out the promotion here https://www.cimbbank.com.sg/en/personal/news-and-promotions/promotions/accounts/cimb-fast-fixed-deposit-promo.html . Also, fixed deposits is a safe way to grow your money as it's assured by the Singapore Deposit Insurance Scheme for up to $50k.

The cons of fixed deposits is that if you were to withdraw the money, you would not be able to get that extra interest that you could have earned. But contrary to popular belief, you can withdraw the money from your fixed deposit account. If you are looking at long term, can consider Singapore Savings Bonds as well as it offers more than 2% interest, captial guaranteed and is liquid.

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Most FD does not have any Penalty for withdrawal but more on lose of interest or pro rated.

There are usually a minimum amount of $10k for FD.

High Yield Savings (HYS) account are recommended if we are comparing to Saving accounts at 0.05% interest rate per annum.

Some HYS requires spending so is good to look at CIMB FastSaver or StarSaver.

You can also consider Citi Max iGain but u need to lock $15k for 12months with no withdrawal to kick start the 2% (for now) interest rate per annum.

CIMB Savers account will be more str forward if you are using the money anytime.

Please Upvote for me if you find my reply have Quality.

Thank you.

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FD pros

  • safe and principle protect
  • higher interest than normal savings account—> assuming no market changes
  • no spending required

other savings accounts (Uob one,DBS multiplier etc)

  • spending required on Cc
  • possible need of salary credit
  • possible need of Giro and payments online
  • possible need of investments

for older folks FD is better because they might not meet all the requirements

if you are anle to meet the requirements then this would be a better option

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