What is a Singapore Dollar fixed deposit?

That’s no surprise because there really isn’t some massive secret to earning a decent yield on your cash savings. You’re never really going to earn more than 3% so, as the saying goes, “if it sounds too good to be true then it probably is”.

One of the safest investments that generates a yield for individual investors in Singapore are fixed deposits (FDs). A fixed deposit account is a type of deposit account offered by banks in Singapore, providing guaranteed returns and security. This is one of those “sleep-well-at-night” type of investments but it does have both its pros and cons for investors to consider.

Singapore dollar fixed deposits 101: an explainer

In Singapore, these fixed deposits can sometimes be referred to as “time deposits” but they’re effectively one and the same. Issued by banks in Singapore Dollars (SGD), these FDs have varying tenors where the bank locks up your money for a specified time.

These time periods range from as short as 1 month to as long as 24 months. However, among the most popular tenors are 6 months to 12 months as these are not too short in tenor but also not too long – think of them as the “Goldilocks” zone of tenor for FDs.

The key thing is that your money is locked away for that specified amount of time. What do you get in return? Well, the bank pays you a specific guaranteed interest rate, also known as the rate p.a, which is used to calculate your annual returns. When the term ends, or upon maturity, the bank will pay back your FD along with your interest.

Many banks offer a promotional rate on minimum deposits for SGD FDs, such as S$10,000 and above, although these are usually found outside of the “Big Three” banks in Singapore. Some banks also require a minimum deposit of S$20,000 to qualify for certain fixed deposit promotion campaigns. Deposit promotion campaigns are common, offering exclusive rates for new or existing customers, and time deposit promotion offers may be available for customers who open accounts online. Additionally, a deposit bundle promotion may provide higher interest rates when your fixed deposit is linked with a savings account.

You can often find online-exclusive FD rates through platforms like MoneySmart or individual bank websites, making it important to shop around and compare. For example, the iSAVvy Time Deposit is an online-exclusive product with a minimum deposit of S$20,000, and the iSAVvy Time Deposit Promotion offers competitive rates for digital-savvy customers. If you have a total balance of S$50,000 of S across multiple fixed deposit placements, this may influence the rates you are eligible for upon renewal or new placements.

How to place a Singapore dollar fixed deposit

Placing a Singapore Dollar fixed deposit is a straightforward process that can be completed in just a few steps, especially with the convenience of online banking. As an account holder, you can start by logging in to your bank’s online platform or visiting their website. Once there, navigate to the fixed deposit or time deposit section and select the type of deposit you wish to place, such as a Singapore Dollar time deposit.

Next, choose the deposit amount and the tenor that best fit your financial goals. In Singapore, the minimum deposit amount for fixed deposits can vary by bank, but typically starts from a few thousand dollars. Tenors range from as short as one month to several years, allowing you to tailor your fixed deposit placement to your needs.

Before confirming your placement, carefully review the current interest rates and the terms and conditions associated with the fixed deposit. Interest rates for fixed deposits in Singapore are subject to change without prior notice, so it’s important to check the latest rates for your chosen tenure and deposit amount. Higher interest rates are often available for larger deposits or longer tenors, but these may also come with stricter conditions.

Once you’re satisfied with the details, you can proceed to place your fixed deposit online, or, if you prefer, visit a bank branch for assistance. After your fixed deposit is successfully placed, you’ll receive a confirmation, and your account will reflect the new deposit.

Remember, while you can enjoy higher interest rates on your Singapore Dollar Fixed Deposit compared to a regular savings account, your funds will be locked in for the chosen period. Early withdrawal may result in penalties or loss of interest, so be sure to consider your liquidity needs before making a commitment.

Pros of Singapore dollar FDs

For an admittedly pretty “plain vanilla” product, FDs remain popular for a number of reasons. First off, they’re safe and their returns are guaranteed – as they’re insured by the Singapore Deposit Insurance Corporation (SDIC) that covers up to S$100,000 of deposits and FDs. Do note that this SDIC protection only extends to Singapore Dollars FDs and not FDs in foreign currency.

Second, Singapore Dollar FDs also provide a straightforward way of getting a yield on your short-term cash holdings. Furthermore, the various tenors for FDs can help provide a level of flexibility if, say, you don’t want to lock your money up for too long.

With tenors ranging from 1 to 3 months, investors can also make use of FDs’ shorter tenors to get a guaranteed yield for their cash.

Cons of Singapore Dollar FDs

Of course, as mentioned before there are downsides to Singapore Dollar FDs as well. The biggest one is the illiquidity associated with them, i.e. the inability to withdraw your money early if you want/need to. If you do decide to withdraw early, there are normally penalty fees associated with that, and this can impact your fixed deposit placements.

To get promotional rates for many of these SGD FDs at banks, a minimum deposit is required, and these can be hefty, ranging from S$10,000 to S$30,000. 

Most deposit promotion or fixed deposit promotion campaigns also require a minimum deposit amount to qualify for exclusive deals or higher rates. The type of deposit account you choose can also affect your eligibility for certain promotions. As with anything, it’s important for investors to study the fine print of a headline advertised FD rate before investing.

Finally, as with anything, FD rates will fluctuate but your ability to pivot and invest into higher-yielding ones could be limited if your funds are tied up in FDs that have relatively longer tenors. They also tend to provide a slightly lower yield for investors when compared to other money market fund (MMF) alternatives.

For instance, many MMFs or short-term T-bills currently offer higher effective returns with added liquidity, although they are not SDIC-insured.

Additionally, some digital banks may offer flexible fixed deposit-like products with better rates and no early withdrawal penalties, but these often come with different terms and conditions.

How to think about Singapore dollar FDs as a cash option

When considering Singapore Dollar fixed deposits as a cash option, it’s important to weigh their benefits and limitations to see if they align with your financial objectives. Here are some key points to keep in mind:

Interest rates

Fixed deposits in Singapore typically offer higher interest rates than standard savings accounts, making them an attractive choice for those seeking a better return on idle cash. However, interest rates are subject to change, and banks may adjust their rates for new placements at any time. Always check the latest rates before committing your funds.

Liquidity

While a fixed deposit can provide higher interest, it requires you to lock in your money for a set period. If you need to access your funds before the maturity date, you may face penalties or forfeit some of the interest earned. Consider your cash flow needs and only commit funds you won’t need in the short term.

Risk and protection

Fixed deposits are considered low-risk, as they are insured by the Singapore Deposit Insurance Corporation (SDIC) for up to S$100,000 per depositor per bank. This makes them a secure option for safeguarding your savings, but it’s still important to review the terms and conditions of your fixed deposit to understand any specific requirements or limitations.

Flexibility and features

Some banks offer flexible fixed deposit options, such as the ability to renew your deposit automatically at maturity or to withdraw early under certain conditions. Look for features that match your preferences, and be sure to read the fine print.

Promotional rates

Many banks in Singapore run fixed deposit promotions, offering higher interest rates for new customers, fresh funds, or specific tenures. Taking advantage of these promotional rates can help you maximise the returns on your deposit, but remember that these offers are often for a limited time and are subject to change without prior notice.

By carefully considering these factors, you can decide if a fixed deposit is the right cash option for you. Always compare rates, review the terms and conditions, and look out for promotional offers to ensure you’re getting the best deal for your Singapore Dollar fixed deposit.

How to think about Singapore Dollars FDs as a cash option 

Singapore Dollar fixed deposits are clearly a safe way to get a transparent return on your cash holdings, given they’re protected and insured by the SDIC in Singapore. 

Despite this, there are also some downsides to SGD FDs in that they are highly illiquid. That means investors are constrained and have to leave their funds tied up for a specific amount of time.

Alongside a generally lower yield, this means that investors should ensure they fully educate themselves on the broad range of options out there if they want a low-risk to no-risk return on their cash. 

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