Contributed by Simone Kow and Carrie Arndt
If you're seeking to diversify your investments, or simply want to earn more for savings, you may be interested in a low-risk Singapore Dollar fixed deposit account. This guide reviews the basic structure and purpose of fixed deposit accounts, so you can best determine if this type of investment is a good fit for you.
Table of Contents:
What are Fixed Deposit Accounts?
Fixed deposit accounts offer a semi-flexible way to earn interest at higher rates with little-to-no risk. As for the process, consumers first submit funds to the bank for a set amount of time. This agreed-on period can be as short as 1 week or as much as 3+ years, though 3, 6, 9 and 12 month tenures are more common. Once this time period ends, consumers receive their initial funds back, plus interest–which is calculated based on a rate contracted when the funds were first deposited. While it's possible to recall funds before the end of the tenure, this often means forfeiting interest, and may even incur penalty fees.
Most banks in Singapore offer fixed deposit accounts, with many extending eligibility to foreigners and even individuals as young as 12 years old. Typically, there are no additional bank fees associated with such accounts, which also makes fixed deposits especially accessible as investment options.
Understanding Fixed Deposit Interest Rates
Fixed deposits are so attractive because they offer guaranteed return at a respectable interest rate, compared to other investments which are riskier or have lower rates. To begin with, interest rate is contracted upfront, when the deposit is made. Even if rates change by the time the tenure ends, the account holder earns based on this initial rate. This is important because most banks offer frequent promotional rates, which often change from month-to-month. While "board rates" tend to remain constant, these cycling promotions impact the competitive landscape of fixed deposit offers. It's advisable to check for the latest offers before making any account decision.
The interest rates displayed by banks are almost always shown as "per annum" (p.a.), even if the advertised tenure is above or below 1 year. You can calculate the actual return you will get in terms of interest by multiplying the principal (SGD amount placed in deposit) by the displayed interest rate (% p.a.) by tenure for the deposit (as a fraction of 1 yr). This formula is a great tool for comparing potential earnings across bank offers.
Example Calculation of Interest Earned by Fixed Deposit Offer
|Interest Rate (% p.a.)||0.95%|
|Tenure of Deposit||0.5yr (6mo)|
|Total Interest Earned||S$47.50|
Some fixed deposit accounts compound interest differently, however. Accounts for senior citizens (minimum 55 years old) sometimes offer interest pay-outs by month, rather than just at the end of the deposit tenure. Other accounts, like ICBC Step-Up, bump up interest rates by quarter, further incentivising account holders to hold on until the very end of their tenure.
Overall, Singapore Dollar fixed deposit interest rates average to about 1.00% p.a., though this number varies by bank, tenure, deposit size, and current promotions.
Role of Deposit Amount and Tenure
Recalling the formula for determining interest earned on a deposit, the tenure and size of the deposit are key factors in driving value. In general, deposits held for a longer tenure (>12mo) earn greater interest–at least at board rates. Often, these leads are overwritten by high promotional rates at more common tenures (3, 6, 9 and 12mo). In terms of deposit size, small deposits (S$5k–S$10k) earn at lower rates on average, except when paired with longer tenures (>12mo). This suggests that length of deposit has a greater impact than size of deposit.
|Average Board Interest Rates by Deposit Size and Tenure 2020|
|Short Tenure (3, 6 Mo)||0.41%||0.64%||0.77%|
|Medium Tenure (9, 12 Mo)||0.71%||1.02%||1.09%|
|Long Tenure (24, 36 Mo)||1.14%||1.14%||1.20%|
These trends apply to the competitive landscape of fixed deposits, but are not always distinct within individual banks. For example, HSBC's accounts have great rates for longer tenures (especially for small and medium-sized deposits), but are less competitive for shorter or medium-length tenures. On the other hand, ICIC offers respectable rates for shorter tenures with small deposits, but falls short for offers on long tenures with large deposits.
Benefits & Risks of Fixed Deposit Accounts
The leading benefit of a fixed deposit account (also called a time deposit) is its guaranteed return. Unlike riskier investments, this deposit–when redeemed at the end of its tenure–will always yield added interest. Comparatively, options like foreign currency fixed deposits may seem "safe," but can actually lose money.
Another perk is that fixed deposit accounts are also very low-maintenance, especially compared to most savings accounts. There are typically no extra bank fees, and interest rate remains constant. There's also no need for tracking minimums, or to engage in extra banking habits to earn promotions.
Finally, a potential perk is liquidity. While doing so may forfeit any interest gained, it's still possible to withdraw funds prematurely. There are also a variety of tenure options, sometimes for as little as 1 week (though these require large minimum deposits).
Risks of fixed deposit accounts are fairly limited. For one, liquidity can also have a downside. Withdrawing funds before end-of-tenure may mean forfeiting any interest earned. Still, this rarely equates to a loss (though some banks reserve the right to levy penalty fees). Another potential "risk" is missing out on a great promotion by opting to make a deposit either too late or too early. Most banks update promotions at the start of each month, so it's worth keeping tabs in order to make an informed decision.
Want to start putting money in fixed deposit accounts? Here are some of the best fixed deposit rates you can find in Singapore.
Best Fixed Deposit Rates in Singapore
Best for Premier Account Holders: HSBC Premier Time Deposit
Consumers with an HSBC Premier banking relationship have access to top interest rates with HSBC Premier SGD Time Deposit. It's worth mentioning that this account is a bit challenging to qualify for (consumers must maintain a S$200,000 balance, S$15,000 monthly salary credit, or have a property loan of at least S$800,000). The Premier deposit offers a welcome gift for new customers who deposit fresh funds into their accounts. Salary crediting or recurring monthly deposit of S$15,000 will earn a S$100 cash credit, S$200,000 will come with a S$200 cash credit and a deposit or investment of S$200,000 will come with a S$500 cash credit reward.
|HSBC Premier Board Interest Rates (% p.a.), Tenure by Deposit Size|
|HSBC Premier Interest Rate Earnings by Select Tenures and Deposit Sizes|
Long Tenure, Smaller Deposits: UOB Singapore Dollar Fixed Deposit
UOB Singapore Dollar Fixed Deposit offers some of the market's highest interest rates for small-to-moderate (< S$50,000) sized deposits with longer tenures, and also comes with an attractive promotion. Currently, consumers can earn a respectable 2.70% p.a. with just a S$10,000 minimum deposit for a 10 months tenure. It's worth mentioning that most banks only offer promotions at milestone tenures (3, 6, 9, or 12 months), so this is a remarkable fit if 10 months is closer to your desired length.
This account is also especially competitive, as mentioned, for long-term tenures with small-to-moderate deposits. In fact, deposits placed for 14 to 24 months earn 0.20% interest while 36 months will earn an impressive 0.50% p.a.; consumers looking to invest less than S$50,000 will have a hard time finding higher rates elsewhere.
|UOB Board Interest Rates (% p.a.), Tenure by Deposit Size|
|1, 2, 3 Month||0.05%|
|4, 5, 6 Month||0.05%|
|7, 8, 9 Month||0.10%|
|10, 11, 12 Month||0.15%|
|13, 14, 15, 18, 24 Month||0.20%|
|UOB Interest Rate Earnings by Select Tenures and Deposit Sizes|
Wide Range of Available Tenures: OCBC SGD Time Deposit
- For both Cash and CPF fixed deposits: Earn up to 2.70% for 6-months tenor, with a minimum deposit of S$30,000
If you have a very specific deposit tenure in mind, it's definitely worth considering OCBC SGD Time Deposit. While many banks only offer deposits with milestone tenures (3, 6, or 12 months for example), OCBC FD allows consumers to select tenure by the month. In other words, this is one of the few accounts where tenure can be set for unique terms such as 4, 7, 13 months or others. There's also only a S$5,000 minimum deposit requirement.
Even better, OCBC SGD Time Deposit has a promotion available with attractive rates–consumers can earn 0.50% p.a. across 6 months with just S$30,000 minimum deposit. In other words, those taking advantage of this offer will earn at least S$80 in earnings, which makes this deposit definitely worth considering.
|OCBC Board Interest Rates (% p.a.), Tenure by Deposit Size|
|1, 2 Month||0.05%||0.05%||0.05%|
|3, 4, 5 Month||0.05%||0.05%||0.05%|
|6, 7, 8 Month||0.10%||0.10%||0.10%|
|9, 10, 11, 12 Month||0.10%||0.10%||0.10%|
|13, 14 Month||0.15%||0.15%||0.15%|
|15, 16, 17, 18, 19 Month||0.20%||0.20%||0.20%|
|20, 21, 22, 23, 24 Month||0.20%||0.20%||0.20%|
|OCBC Interest Rate Earnings by Select Tenures and Deposit Sizes|