What You Need to Know About FD Early Withdrawal Penalty in Singapore

About FD early withdrawal penalties

An FD early withdrawal penalty is a fee charged by banks when you withdraw your funds from a fixed deposit account before the maturity date. Essentially, it's the price you pay for breaking the agreed-upon term, usually a portion of the interest you've earned or would have earned.

Costs of FD early withdrawal penalties

The cost of an early withdrawal of fixed deposit can vary significantly depending on the bank and the specific terms of your FD. Generally, you'll lose some, or all, of the interest you've accrued. Some banks may also impose additional administrative fees.

>> Read more: Best alternatives to fixed deposit accounts in Singapore

Here's a simplified example: Imagine you have a $10,000 FD with a 12-month term and an interest rate of 2% per annum. If you withdraw the funds after only six months, the bank might charge a penalty equivalent to three months' worth of interest. In this case, you'd lose about $50 of the $100 you would have earned in interest. If you withdraw even earlier, the penalty might eat into your initial deposit. 

Some banks might calculate the FD withdrawal penalty as a percentage of the interest earned, or as a set number of months of interest. It is important to check with your bank for their specific terms before committing to a fixed deposit.

>> Compare: Fixed deposits vs. endowment plans vs. cash management accounts: Which should you choose?

Other costs associated with early withdrawals 

Beyond the immediate penalty, an early withdrawal of a fixed deposit means missing out on compounding interest. Compounding is where the interest you earn also earns interest, leading to faster growth of your savings over time.

Consider two depositors: Alice and Bob. Both deposit $10,000 into a 2-year FD with a 2% annual interest rate. Alice leaves her FD untouched until maturity, enjoying the full benefits of compounding. 

Bob, however, withdraws his funds after one year, incurring a penalty and losing some interest. While Bob gets his initial $10,000 back, he misses out on the additional interest he would have earned in the second year, which would have been calculated on the initial deposit plus the first year’s interest. 

This illustrates how the early withdrawal of a fixed deposit can hinder your long-term savings goals.

>> Read more: When are fixed deposits better than Singapore savings bonds?

Early FD withdrawal penalties at major Singaporean banks

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How to avoid an FD penalty

There are practical solutions to minimise or even avoid early withdrawal penalties on your fixed deposits.

1. Wait till maturation date

The simplest way to avoid an FD early withdrawal penalty is to wait until your FD matures. Before locking your funds into an FD, carefully assess your liquidity needs and ensure you won't need the money before the term ends. Premature withdrawals should be considered a last resort, as they can significantly impact your returns.

2. Opt for no-penalty FDs

While not as common as traditional FDs, some banks in Singapore may offer no-penalty FDs, such as the Hong Leung Finance Fixed Deposit and ICBC SGD Fixed Deposit. With these FD options, you can withdraw the full deposit amount before the maturity date without paying any penalties. However, you may not receive any interest if the deposit is withdrawn prematurely. 

3. Adopt a laddering strategy

An FD laddering strategy involves dividing your total deposit into multiple FDs with staggered maturity dates. For example, you could invest $10,000 by opening four FDs of $2,500 each, with terms of 6 months, 12 months, 18 months, and 24 months. 

As each FD matures, you can reinvest the funds into a new long-term FD. This approach provides regular access to your funds while still benefiting from the higher interest rates of longer-term FDs.

Compare FD rates in Singapore

Compare the best fixed deposit rates in Singapore for 2025 with various banks, tenures, and minimum deposit amounts.

The mechanics behind FDs

Fixed deposits are a straightforward savings tool. You deposit a lump sum of money for a predetermined period, known as the term, and in return, the bank pays you a fixed interest rate. The longer the term, generally the higher the interest rate offered. 

However, this comes at the cost of liquidity – your money is locked in until the maturity date. This trade-off between higher rates and liquidity is crucial to understand as you'll need to carefully consider your financial needs and goals before committing your funds to an FD. 

For example, if liquidity is a concern, alternatives such as endowment plans or cash management accounts are also worth considering.

Explore various banks’ FD rates

Explore FD rates at various banks in Singapore* to compare interest rates, tenures, and minimum deposit amounts. 

• Bank of China: 2.65% to 2.75%

• CIMB: 2.55% to 2.60%

• CitiBank: 2.50% to  2.80%

• DBS/POSB: 2.45%

• Hong Leong Finance: 2.65%

• HSBC: 2.55%

• ICBC: 2.75%

• Maybank: 2.45% to 2.90%

• OCBC: 2.35% to 2.45%

• RHB: 2.70% to 2.80%

• SBI: 2.85%

• Sing Investments & Finance LTD (SIF): 2.60% to 2.65%

• Standard Chartered: 2.30% to 2.50%

• UOB: 2.4%

*Rates retrieved on 18 March 2025. Always check our page on the best FD rates for the latest figures.