Best Fixed Deposit Rates in South Africa 2023
Until recently, the search for best interest rates in South Africa for fixed deposits wasn’t as important as it is today. Understandably so, because the need to save money wasn’t as apparent as it is now. Covid-19 and rising annual inflation rate has changed how everyone thinks about money and spending.
Which bank has the best interest rate for fixed deposits?
|Bank||Nominal Interest Rate %||Terms|
|First National Bank (FNB)||8.50%||60 Months|
|African Bank||8.45%||60 Months|
|Capitec Bank||8.15%||49 – 60 Months|
|Discovery Bank||7.00%||60 Months|
|6.60 – 8.15% (depending on account)|
The current South African interest rates are at all time lows (the repo rate is at 3.5% and prime commercial lending at 6.9%). Advice from the monetary policy committee and reserve bank has been to keep the repo percent rate low in order for the market to maintain steady inflation rates.
These money lessons have been more profound in recently. The year has been tough for most South Africans because of the economic challenges caused by the COVID-19 pandemic. On the flip side, the pandemic has taught South African’s financial lessons and encouraged the need to practice the saving culture regardless of the amount you earn. When the virus first struck the globe, only people who had long-term savings could survive best without depending on government aid and high-interest loans.
South Africans are poor savers and that is why the government has collaborated with major banks to encourage its citizens to save more. There are many ways of saving money but today our focus is on fixed deposit savings with banks offering the best annual interest rate in South Africa to give you a return on your funds.
Fixed deposit savings allows you to save your money for long-term goals. This is where you lock up your money for from one month to five years without withdrawing and your money earns a competitive interest rate on a monthly basis. Fixed deposit accounts attract zero monthly fees but can bring you decent returns. Remember the interest rate your money earns in a fixed deposit account gets defined and locked in until the end of the chosen time, this annual rate varies with different banks and even accounts within banks.
Below are the top six banks with the best interest rates for fixed deposits in South Africa. If you are a business you might be looking more at money market funds and unit trust investment funds provided by other financial services companies to find a competitive investment. Preference shares is another low risk investment option, which provides a dividend which is linked to the prime rate.
The nominal rate is the interest rate on fixed deposits which is unadjusted for compounding interest. While the effective rate is the interest rate earned on a fixed deposit account, taking into account the effect of compounding interest.
Please note that rates are often advertised as indicative rates which are subject to change and you should always do your own research!
As long as you have R500, you can open a fixed deposit account with the African bank. The application is easy and only takes a few minutes. This bank offers you one of the best savings rate in South Africa and also allows you to withdraw your money instantly upon maturity. What makes the African Bank stand out in fixed deposits is because it offers customers guaranteed returns with the fixed interest rates throughout the investment duration. It also gives you the chance to choose the duration of your interest payouts that range from 6 to 12 month time periods or at maturity.
Note that different term lengths and pay outs attract different predetermined interest rates. For example, 3 months – 4.5% interest, 6 months – 5%, 12 months – 5.75%, 24 months – 6.70%, 36 months – 7.15% and 60 months – 8.45% interest.
African bank fixed deposit investment works for a fixed investment amounts. That means you cannot add on to your fixed deposit amount. Wait until maturity for you to withdraw the amount and maybe restart again with a new and higher fixed amount.
If you wish to withdraw your whole money or part of it before the maturity period, you will incur some penalty and not achieve your primary saving goal. So, the choice to withdraw lies in you and if that is the case, you can contact the customer care center and provide reasons for early withdrawal. The bank will also require you to submit your original certificates such as medical or death certificates that support your reason for withdrawal.
ABSA South Africa boasts three fixed deposit accounts that offer customers high-interest rates on their investment. The bank allows you to have accounts in five different currencies that include USD, SCR, GBP and EUROs. The accounts include
Dynamic fixed deposit: The dynamic fixed deposit account attracts a minimum of R 1000. It attracts zero monthly fees and allows you to choose between a fixed interest rate or a prime-linked nominal rate. The investment runs from 8 days to 5 years which you can access up to 50% of your money. This account attracts daily interest, which is capitalized monthly.
Islamic term deposit: Islamic term deposit account comprises a halal investment that is based on the Mudarabah doctrine. It offers variable returns that depend on the selected investment period, which runs from 8 days to 60 months. The Account requires a minimum deposit of a minimum of R1000. Once you make a fixed deposit in this account, you cannot withdraw your money until it reaches maturity. However, the bank allows you to withdraw money under special circumstances, although you have to give up your share proceedings.
The difference between the Islamic term deposit and the other deposits is that your money does not earn any interest. Instead, your account gets credited with the profit or losses the banks make from your investment.
Ordinary fixed deposit account: This is an ordinary fixed deposit account that offers a fixed interest rate for the whole investment term. It requires a minimum deposit of R 1000.
This account allows you to choose your preferred investment term between 8 days to 5 years. The good thing is that it favours old people in that if you are over 55 years, the bank awards you with bonus interest if you invest R 100 000 for one year. With this offer, you can withdraw your money either monthly, annually, quarterly or at maturity. You can also use your account to gain a loan from the bank.
Capitec Fixed Deposits
Another bank with a fixed deposit with some of the best interest rates is Capitec Bank. The bank allows you to invest a minimum of R 10000 and a maximum of R 20 million for 6 months to 5 years. All the money that you invest with the bank earns an interest rate of 8%. Further, it uses the nominal interest rate to calculate your daily interest earnings. Capitec only pays you your money plus interest earned at the end of the maturity period. The good thing is that you can reinvest the interest or transfer it to your savings account.
FNB Bank offers fixed deposits with competitive rates from 3 to 36 months with a minimum deposit of R 10,000. The bank also boasts different fixed deposit classes of people below 55 years and beyond 55 years. The higher you invest, the higher your interest earnings and the longer your investment period, the higher the interest earnings. Like other banks, FNB fixed deposit accounts are flexible and allow depositors to add money into their existing fixed deposits at maturity. So, after maturity, you can choose to reinvest your interest or entire capital.
Discovery Bank Fixed Deposit
Discovery Bank South Africa is an upcoming bank that boasts fixed deposit accounts with high interest ranging from 4% to 7%. The bank allows you to open a fixed deposit account online and make your first minimum deposit of R 100,000 for 3- 60 months once the account is active.
The bank has three different fixed deposit accounts, which include:
Tax-free savings account: This benefit of a tax-free savings account is that the account that allows you to save money into a fixed account with no tax obligations imposed on your interest growth earned. However, the account requires you to deposit a maximum of R 36,000 annually. If you choose a lifetime deposit, then you need to deposit a maximum of R 500,000.
Notice savings account: This kind of account requires you to notify the bank before you make any withdrawals from your fixed deposit account. The earlier the notice, the higher the interest rate earned.
Demand savings account: This account allows you to withdraw your money. It resembles a cheque account which you can access whenever you want with no notice.
RSA Retail Bonds
Another option for long term investment is to invest in retail bonds.
It is an an investment with the South Africa Government which earns fixed, inflation linked or variable interest for the duration of the investment. RSA Fixed Rate Retail Savings Bond series provides a number of different bond options with 2-year, 3-year and 5-year terms.
Theses Savings Bonds earn a market-related fixed interest rate, which is priced off the current government bond yield curve. The bonds are payable on the interest payment dates until maturity depending on the option chosen. Different interest rates apply to each of the maturities in the series.
There is a minimum investment amount of R1 000 and the investment amount cannot exceed R5 million.
Advantages of Fixed Deposits
Low-Risk Investments: This is the only investment that allows you to keep a certain amount of money for a specific time and guarantees your money back with some interest on top after maturity. It is a great investment where you don’t want to risk losing any capital, compared to online share trading for example.
Interest tax threshold: Your interest earned money attracts zero tax provided it is within the SARS threshold of R 100000. Banks have no obligation to deduct tax on your money and this comforts you if you have a small fixed deposit account. After this threshold however it does become taxable income and capital gains tax would apply.
Flexible tenure: fixed deposits tenure is flexible and varies with the deposit holder. The six banks listed above have different tenures and rules, but the account holder makes the final decision. You can either decide to extend the tenure or redeem it.
Disadvantages of Fixed Deposit Account
Once you put your money in a fixed account, you can’t withdraw it, and if you do, the bank penalizes you.
Given that they are low-risk investments, you get lower returns on your investment in the long run compared to other riskier investments such as shares and bonds.
Saving for your future projects and emergencies is a wise option, and that is why the above banks in South Africa provide you with a wide range of plans with the good interest rates. You can either opt to deposit with popular banks such as ABSA, FNB, Discovery Bank, Standard Bank and African Bank. Fixed deposit bank accounts is a financial service that allow you to save money for a minimum period of time without withdrawing until it reaches maturity.
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