In all the years I had been with FDs in Malaysia, I never once met with the good fortune of having an automatic renewal of FD at a promo rate. From all the ones I had read, the promos usually state very clearly beforehand in their flyers nowadays (nevermind if never read or understand the detailed sheets of T&C) that autorenewal will be at the board rate at the time of renewal. Specifically, this means never ever at any promo rate which coincidentally happen to be on at that time.
Besides this point on how banks operate actually to the bank's benefit on autorenewal time - not yours of course, there are a few things to note.
1) To avoid this problem you should redeem the FD on maturity always. And then make a new placement if you find an attractive offer at the same bank or some other bank. In practical terms, you will almost always lose if you autorenew and continue.
2) At the time of maturity, the old FD either renewed or redeemed is never a Fresh Fund but an Existing Fund. In most cases this automatically disqualifies it from being eligible for any promo FD at the bank.
3) However, sometimes the bank will make an exceptional offer subject to approval usually (take more time) to allow you to use the old fund for the promo or with a additional top-up fresh money from outside the bank. You can add more or you can even ask whether can use less top-up as don't have so much at the moment. If the bank wants to treat you like a favoured depositor, or keep you as a loyal depositor, or they like the amount involved, they will agree.
4) Normally, if already past the maturity date when you show up or redeem online, you will be FULLY penalised by not having any interest at all for the days after the maturity date. Usually, you will need to wait at least 3 months before you can qualify for HALF penalty - number of days/365 x renewed rate/2. If there is a better promo, it is usually worthwhile as soon as possible to redeem the new principal which is the old principal plus old interest, and forget about any full penalty interest, but you need to calculate sometimes.
5)Promo FD on autorenew usually goes down to FD board rate - unless the new board rate happens to be higher than the old promo rate!
6) However, banks can also offer various normal FD offers for seniors, juniors, teens, preferred, foreign currency FD, etc besides board rate which are not considered as promo FD. Autorenewal in such cases, will usually be the rate for each type of FD at the time of maturity. It is a good idea to check that the renewal is to the relevant rate, in case of any mistakes - especially foreign currency.
7) You may wish to pay attention to redeem and change to a senior FD rate from normal board rate autorenew when you qualify for the bank's idea of senior. The rate may be higher, or there is an advantage in monthly payment of interest into a savings account of your choice.
8) You should be very careful about your choice of which SA you open and use for monthly creditting of FD interests, as there can be vast differences in the savings interest rates on the FD interests, and when it is creditted, besides other features like online IBG, IBFT, debit card and online usage limitations and charges. Please also note that the bank can also introduce new and better savings accounts in future to be competitive, and you may do better to change as well.
good share, thanks! and I agree with you on the auto-renewal part.
have you been approached by HLB investment team on a '7% return' investment plan? I don't have much of the details, however.
Dec 22 2016, 03:46 PM
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same here, just worry about the withdraw process.... since scam call nowadays...............
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