How do Fixed Deposits Work

Imagine you have S$10,000 sitting in your savings account. It’s safe, but it’s barely earning any interest—just S$5 a year at a typical base rate of 0.05% p.a. in Singapore. You want to grow your money, but investing in stocks or crypto feels too risky.

So, what’s a safer option that still gives you guaranteed returns? Fixed deposits (FDs) are one of the simplest ways to grow your money without worrying about market volatility. As of April 2025, banks in Singapore are offering FD interest rates between 2% and 2.9% p.a.—that’s nearly 50 times what you’d earn from a basic savings account. 

For example, Maybank offers a 6-month FD at 2.9% p.a. with a minimum deposit of S$20,000, making FDs a compelling choice for conservative savers seeking stable returns.

Try our fixed deposit calculator simply by entering your investment amount, interest rate and duration!

Why fixed deposits matter in 2025

Fixed deposits have been a trusted financial tool in Singapore for years. However, FD rates fluctuate based on economic conditions. In 2025, the average FD rates in Singapore range from 2% to 2.90% p.a., depending on tenure and bank. 

This renewed interest comes at a time when riskier assets like stocks and cryptocurrencies remain volatile amid global economic uncertainty. With inflation still sticky and market sentiment wavering, fixed deposits offer a stable, low-risk alternative for growing idle cash—especially for those prioritising capital preservation and predictable returns.

So what is a fixed deposit?

A fixed deposit (FD) is a type of bank deposit where you lock in a specific sum of money for a set period, and in return, the bank pays you a fixed interest rate. 

Unlike a regular savings account, you cannot withdraw the money before the maturity date without facing penalties or losing a portion of the interest earned.

Think of an FD as a secure savings box. You place your money in the box, agree not to touch it for a while, and in return, the bank rewards you with extra money (interest) when you finally open it at the agreed time. This structured approach ensures that your savings remain untouched and grow steadily, providing a sense of financial security and discipline.

How is a fixed deposit different from a regular savings account?

While a fixed deposit offers a higher interest rate, it lacks the flexibility of a regular savings account. 

If you anticipate needing access to your funds before maturity, alternatives like StashAway Simple Cash may provide better flexibility with competitive returns.

Ready to dive deeper? Next, we’ll explore how fixed deposits work, including interest calculations and different FD types available in Singapore.

How does fixed deposit work?

Fixed deposits operate on a straightforward principle: you deposit a lump sum for a predetermined period, and in return, the bank pays you interest. The key elements of an FD include:

How fixed deposit interest is calculated

The interest earned on an FD is typically calculated using the formula:

Interest Earned = Principal x Interest Rate x Tenure in months/12

Example calculation:

• Principal: S$10,000
• Interest Rate: 2.70% p.a.
• Tenure: 12 months

Interest Earned = $10,000 x 2.7% x 12/12 = $270

This means that by the end of a 12-month period, you would earn S$270 in interest, giving you a total of S$10,270 including the initial principle of S$10,000.

What happens when your FD matures?

When your FD reaches the end of its tenure, you have several options:

1️⃣ Withdraw your funds – Receive your principal and interest.

2️⃣ Reinvest into another FD – Extend your savings period at a potentially new interest rate.

3️⃣ Auto-renewal – Some banks automatically reinvest the funds unless you opt-out.

If you withdraw before maturity, you may incur penalties or receive a lower interest payout. That’s why it’s essential to choose an FD tenure that matches your financial needs.

Different types of fixed deposits in Singapore

Not all fixed deposits are the same. Banks in Singapore offer several variations to cater to different financial needs:

1. Standard fixed deposits

Standard fixed deposits are the most common type of FD, offering a fixed tenure and a fixed interest rate. These deposits provide stability and predictable returns, making them ideal for conservative savers. 

FD rates are updated periodically based on market conditions, so it’s advisable to monitor rate changes to maximize returns.

2. Promotional fixed deposits

Promotional fixed deposits are special FDs offered by banks for a limited time, often with higher-than-average interest rates for specific deposit amounts and tenures. 

These promotions are designed to attract new customers or encourage deposits, making them a great choice for individuals looking to maximize their returns while maintaining low risk.

3. Foreign currency fixed deposits

Foreign currency fixed deposits allow you to deposit funds in currencies such as USD, AUD, or EUR. These FDs offer potentially higher returns compared to local currency FDs but come with currency exchange risk. 

They are best suited for individuals who have knowledge of forex trends or hold foreign currency earnings and want to take advantage of favorable exchange rates.

4. Step-up fixed deposits

Step-up fixed deposits offer a gradually increasing interest rate over time, rewarding long-term commitment. While they provide the advantage of earning higher interest in later stages, they are less common in Singapore compared to other FD types. 

Benefits and risks of fixed deposits

Fixed deposits offer a balance between security and returns. Unlike investments that fluctuate with the market, FDs provide guaranteed interest rates with low risk. 

They are ideal for those who want a predictable way to grow their savings without exposure to market volatility.

Potential downsides of fixed deposits

While FDs are low-risk, they come with limitations:

❌ Limited Liquidity: Funds are locked in for a fixed tenure. 

❌ Inflation Risk: FD interest rates may not always outpace inflation. 

❌ Opportunity Cost: Other investments may offer higher returns over time.

Despite these downsides, FDs remain an attractive option for individuals who prioritize capital preservation and stability over high returns.

How to open a fixed deposit in Singapore

1️⃣ Clarify Your Financial Goal

Before opening an FD, ask yourself why you need it. Fixed deposits are best suited for those who prioritize capital preservation and low-risk growth. 

If you might need access to your funds before maturity, alternative savings options could be better.

2️⃣ Compare FD Rates 

Before committing to an FD, it’s important to compare the interest rates offered by different banks. Banks frequently update their FD rates based on market conditions and promotions, meaning the best rate today may not be the best tomorrow. 

Some banks also offer tiered rates, where higher deposit amounts earn better returns. You can check our latest FD rates guide here to find the most competitive options.

3️⃣ Choose Your Tenure and Deposit Amount

Once you've identified the best FD rate, determine how long you want to lock in your money and how much you want to deposit. FDs typically offer short- to medium-term tenures ranging from 1 month to 3 years or more. 

While traditionally longer tenures came with higher interest rates, banks in Singapore have started offering higher promotional rates for shorter-term deposits to meet growing demand for liquidity. For instance, Maybank offers 2.9% p.a. for 6-month tenure for their deposit bundle promotion.

Keep in mind that longer tenures reduce flexibility and make sure the deposit amount aligns with your financial goals and liquidity needs.

4️⃣ Open an FD Account 

Most banks in Singapore offer FD applications via their mobile banking apps, making the process quick and seamless. However, some banks may have special promotional FD rates that are only available for in-person deposits. 

Be sure to check with your bank before deciding where to open your FD. – Most banks allow you to open an FD account online or in person. Ensure you meet the minimum deposit requirement.

5️⃣ Transfer Your Funds & Set Maturity Instructions 

When funding your FD, you’ll also need to specify what happens upon maturity. Options typically include:

• Auto-renewal: Your FD will roll over into a new term at the prevailing interest rate.
• Withdraw to account: Your principal and interest will be credited to your savings account.
• Reinvest with modifications: Some banks allow you to adjust the amount or tenure when reinvesting. 

Choosing the right option ensures you maximize returns while keeping funds accessible when needed. – Deposit your money into the FD account through a bank transfer or direct deposit.

6️⃣ Confirm and Monitor

Once your FD is set up, keep track of the maturity date and interest payout.

By following these steps and comparing rates, you can make an informed decision on where to open your fixed deposit and maximize your returns.

Where to find the best fixed deposit rates

Finding the best fixed deposit (FD) rates in Singapore requires regular comparison, as banks frequently update their offers based on market conditions. Below showcases some of the highest FD rates available as per Apr 2025:

• The best 12-month fixed deposit rate was 2.60% p.a. offered by Standard Chartered, with no minimum deposit amount.

• The best 6-month fixed deposit rate was 2.90% p.a. from Maybank, requiring a minimum deposit of S$20,000.

• The best 3-month fixed deposit rate was 2.45% p.a. from Sing Investments and Finance LTD, requiring a minimum deposit of S$10,000.

To stay updated with the latest FD rates:

• Check Bank Websites: Banks regularly update their FD rates online.
• Look for Promotional Rates: Some banks offer limited-time promotions with higher rates for specific tenures or deposit amounts.
• Read Our FD Guide: We frequently update our Singapore Fixed Deposit Rates guide to provide you with the most current offers.

How to Use Fixed Deposits Smartly?

If you’ve decided that FDs are the right savings tool for you, there are ways to optimize your deposits to maximize returns while maintaining liquidity. 

One popular strategy is called Fixed Deposit Laddering, which allows you to enjoy the benefits of FDs without tying up all your money at once.

What is Fixed Deposit Laddering?

Fixed Deposit Laddering is a strategy where you divide your total savings into multiple FDs with staggered maturity dates. Think of it like a relay race where each baton pass ensures continuous movement, just like how your FDs keep rolling for better returns

Instead of putting all your money into one FD with a long tenure, you split the amount into smaller deposits with different terms (e.g., 3, 6, and 12 months). This method helps you:

✅ Access funds periodically – As each FD matures, you can withdraw or reinvest based on prevailing rates. 

✅ Take advantage of rate fluctuations – If rates increase, you can reinvest at a higher rate instead of being locked into a lower one. 

✅ Reduce liquidity risk – Unlike locking up all your money in a single long-term FD, this strategy ensures you have cash inflows every few months.

Example of a FD Laddering Plan

Let’s say you have S$30,000 to place in FDs. Instead of putting the full amount into a single 12-month FD, you can split it as follows:

Once the 3-month FD matures, you can reinvest it in a new 12-month FD at the latest interest rate, keeping the ladder going. This strategy provides a continuous cycle of maturing FDs, ensuring a mix of liquidity and higher returns.

Using this method, you can keep earning competitive FD rates while still maintaining access to a portion of your funds every few months.

Smarter alternatives to FDs in 2025

With fixed deposit (FD) rates hovering between 2% and 2.90% p.a. in 2025, more investors are turning to flexible cash management solutions for better yields without sacrificing liquidity or safety.

StashAway offers three such alternatives that provide stable returns, low risk, and no lock-ins—making them ideal for parking idle cash while staying nimble:

Frequently asked questions (FAQ)

1. Can I withdraw my fixed deposit early?

Yes, but most banks impose penalties, which may include reduced interest earnings or even forfeiting the accrued interest altogether. It’s crucial to check your bank’s early withdrawal terms before committing.

2. What happens if interest rates increase after I lock in my FD?

Once you’ve locked in an FD, the interest rate remains fixed. If market rates rise, you won’t benefit from the higher rates unless you reinvest at maturity.

3. Are fixed deposit returns taxable in Singapore?

No, interest earned on fixed deposits in Singapore is not subject to tax for individuals.

4. What is the best tenure for a fixed deposit?

It depends on your financial goal. If you prefer liquidity, shorter tenures (e.g., 3-6 months) might be ideal. If maximizing returns is your priority, longer tenures (e.g., 12-24 months) often provide better rates.

5. How do fixed deposits compare to other savings options?

Fixed deposits offer stability and guaranteed returns, making them a reliable choice for risk-averse savers. However, they lack liquidity and may not always outpace inflation.

For those prioritizing flexibility, cash management accounts provide easier access to funds and competitive, albeit lower, returns. Bonds offer a middle ground with potential for stable income, though market conditions can affect returns. Meanwhile, stocks and ETFs provide higher growth opportunities but carry greater risk.

Ultimately, the best option depends on your financial goals, risk tolerance, and time horizon. A mix of these instruments could provide a balanced approach to saving and investing.

6. Which bank has the highest fixed deposit rate in Singapore?

Rates change frequently, and different banks offer promotional rates at different times. You can check our regularly updated FD rates guide to find the latest highest FD rates available.

7. What is the minimum deposit for a fixed deposit in Singapore?

The minimum deposit requirement varies by bank, usually ranging from S$500 to S$30,000, depending on tenure and promotional terms. Checking individual bank websites or our FD rates guide can help you find the best option.

8. What happens if I don’t withdraw my FD after maturity?

Many banks automatically renew your FD at the prevailing rate unless you instruct otherwise. It’s best to review your FD terms and set a preferred maturity action to maximize returns.

9. Is it better to split my fixed deposit into multiple accounts?

Some savers split their FD into smaller deposits with different tenures to maintain liquidity and maximize interest. This strategy, known as an FD ladder (as mentioned above in the article!), allows you to reinvest at different times without locking in all your funds at once.

10. Can foreigners open a fixed deposit in Singapore?

Yes, many banks in Singapore allow foreigners to open fixed deposits, but requirements vary. Some banks may require a local savings account, proof of residency, or a work pass. It’s best to check directly with the bank for eligibility criteria.