Time Deposit – What You Need To Know
Despite being a simple investment tool, some time deposit offerings have a range of features. In this article, we discuss some of the common features that you may come across when you compare fixed deposits offered by banks in Singapore.
Frequency of Interest Payment
This section refers to when interest on your fixed deposit is calculated and paid.
The most commonly available option is interest paid at maturity (i.e. at the end of the term) for short-term time deposits, and interest paid annually for long-term time deposits. Some other common options are:
- Annual payment: interest is paid yearly, generally at the end of each year
- Semi-annual payment: interest is paid twice a year, generally at the end of every six months
- Quarterly payment: interest is paid at the end of each quarter (every three months)
- Monthly payment: interest is paid monthly, generally at the end of every month
- Fortnightly payment: interest is paid at the end of every fifteen days or two weeks
- Weekly payment: interest is paid weekly usually at the end of every week
- At maturity payment: interest is paid at the end of the fixed deposit term
Time Deposit Interest Calculation
In Singapore, banks normally quote an annual interest rate for fixed deposits. For example, the interest rate of a 6 month time deposit may be quoted as 0.1% p.a. (p.a. is also known as per annum or per year).
This means, for a SGD50,000 investment, the total interest earned on this particular time deposit investment is:
SGD50,000 x 0.1% x (6 months / 12 months) = SGD25
Auto Rollover or Renewal
If you have selected the auto rollover or renewal facility for your time deposit account,, the bank will automatically reinvest your money (which may include any interest earned) into a new time deposit once your investment reaches maturity.
The new time deposit investment would be rolled over for the same term, but the interest rate may or may not be the same as the savings deposit investment.
It is often advisable to put a reminder in your diary to compare time deposit rates before your term ends. If you need to disable the auto rollover or renewal option, you just notify your bank of your intentions before the maturity of your time deposit investment.