Fixed deposits are known as one of the safest and most profitable investment instruments. Why is that? Because fixed deposit interest rates are generally higher than regular savings accounts.

So, what exactly is a fixed deposit?

What is a Fixed Deposit?

A fixed deposit is an investment instrument in the form of a savings deposit that can only be withdrawn at a predetermined maturity date. Customers are not allowed to withdraw funds before the due date. If they do, a penalty will be imposed.

Interestingly, fixed deposits offer relatively high-interest rates. On average, the interest rate is around 3% per year, depending on the deposit tenure. However, some banks may offer even higher rates.

The combination of high-interest rates and low risk makes fixed deposits a popular choice. Unlike stocks or mutual funds, which have fluctuating returns, fixed deposits are known for their stability. Customers can rely on the earned interest when withdrawing their funds at maturity.

Additionally, deposit terms are flexible. Today, you can open a fixed deposit for a short-term period starting from 7 days to 6 months. There are also long-term options ranging from 1 year to 10 years, depending on the bank’s offerings.

Read: The Advantages of Fixed Deposits in neobank—From Competitive Interest Rates to Flexibility

How to Open a Fixed Deposit

Opening a fixed deposit is very easy, especially if you already have an account with the bank where you want to deposit. Still unsure? Here’s how to open a fixed deposit at a bank:

1️. Fill out a fixed deposit account opening form.
2️. Provide personal identification such as an ID card or driver’s license.
3️. Choose the deposit tenure, for example, 1 year, 5 years, or 10 years.
4. Deposit the required initial funds.

For a more practical experience, you can open a fixed deposit via the Neobank app. If you are an existing customer, you can open a fixed deposit in just a few clicks.

Your deposited money will remain safe until the maturity date. During this period, you cannot add or withdraw funds.

How to Calculate Fixed Deposit Interest

You can manually calculate fixed deposit interest using the following formulas:

For deposits below IDR 7.5 million:

Formula:
Deposit amount × annual interest rate × tenure ÷ 365 (days)

For deposits above IDR 7.5 million:

Formula (after 20% tax deduction):
Deposit amount × annual interest rate × 80% × tenure ÷ 365 (days)

Notes:

• The 80% factor accounts for the 20% tax deduction on interest earnings.
• The tenure is calculated based on the selected duration:
   
  • 1 month = 30 days
     
  • 6 months = 182 days
     
  • 12 months = 362 days

Example Calculation:

You open a Neo WOW Extra 12-month fixed deposit with an 8% annual interest rate and deposit IDR 1 million for 12 months.

Calculation:
IDR 1,000,000 × 8% × 365 ÷ 365 = IDR 80,000

So, the profit from a 12-month deposit of IDR 1 million in Neobank is IDR 80,000.

For a deposit of IDR 10 million, a 20% tax applies to the interest:

Calculation:
IDR 10,000,000 × 8% × 80% × (365 ÷ 365) = IDR 640,000

So, the profit from a 12-month deposit of IDR 10 million is IDR 640,000.

Read: FLEXI Deposits—A Profitable & Flexible Fixed Deposit Option

How to Withdraw a Fixed Deposit

Once your deposit matures and interest has accumulated, you can withdraw your funds. The withdrawal process for fixed deposits from other banks generally follows the same steps:

1️. Bring your fixed deposit certificate or bilyet to the bank.
2. Inform the bank that you wish to withdraw your deposit.
3. The bank staff will process your withdrawal.
4️. Sign the withdrawal slip provided by the bank.
5️. The funds will be transferred to your main bank account.

How long does it take to withdraw a fixed deposit?

The withdrawal process typically takes 24 hours, but each bank has its own policies regarding the duration of deposit withdrawals.

What if you withdraw before maturity?

If you withdraw funds before the due date, you will incur a penalty.

How to withdraw an online fixed deposit?

For online deposits, the process is even easier. Simply withdraw your deposit through the neobank app:

1️. Open the app.
2️. Select the withdrawal option.
3️. Funds will be transferred to your main bank account.

Alternatively, if you don’t want to withdraw your funds yet, you can extend your deposit. You can request an extension manually or set up Automatic Roll Over (ARO) for seamless renewal.

Considering the convenience, online deposits are the best choice since you can open, monitor, and withdraw your deposits anytime via your smartphone.

Download neobank on  PlayStore or App Store now!

For complete information and terms & conditions regarding neobank products, click the following links:

- WOW Time Deposit: https://bit.ly/EdWebDepositoWOW

- FLEXI Time Deposit: https://bit.ly/EdWebFLEXI

If you want to try neobank products, click the links below:

- WOW Time Deposit: https://bit.ly/DepositoWOWEdu

- FLEXI Time Deposit: https://bit.ly/EduDepositoFLEXI

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PT Bank Neo Commerce Tbk is licensed and supervised by the Indonesia Financial Service Authority (OJK) and Bank Indonesia (BI), and an insured member of Deposit Insurance Corporation (LPS).