Banks often reward loyal customers, those with loans or other products with them special FD rates. Just like
retailers who offer exclusive discounts and freebies to frequent shoppers, banks will reward loyalty in the
same way, by encouraging you to take out more products from them in an effort to lure you away from
You’ll also often hear banks talk about fresh funds when referring to FDs. Fresh funds means money that
is new to the bank, that is to say, cash you are depositing in the bank for the first time, not money you are
bringing over from another account with the same bank.
So why do banks prefer fresh funds? Again, the answer is competition! Like a jealous lover, your bank may
be wondering where else you are keeping your money. By giving you huge returns, hopefully you’ll be
enticed enough to bring all your stray cash into one place. With that said, always read your Terms and
Conditions before signing your name on the dotted line.
Let’s say you have a savings account with Bank A, and they’re currently having a promotion offering loyal
customers 4.25% p.a. with only RM5,000 deposit. To transfer cash from your account with Bank A into the
FD will not get you the promotional rate. Instead, you should remove money stored in Bank B’s savings
account to invest into the more lucrative FD from Bank A.
So there’s really no point in keeping money in a normal savings account right? You’re not looking at the
bigger picture – you may be earning more interest, but an FD won’t be able to give you the freedom to
withdraw money or make cashless payments, as you will find out soon enough