Fixed Deposits or High Interest Rate Savings Accounts – Which One Should You Choose?


If you’re looking for a safe, low-risk investment option, a fixed deposit or time deposit can be one of your options.

Alternatively, you can also grow your savings through digital banks like ING Philippines and CIMB Bank. They offer high-interest rate savings accounts, and opening an account is super easy via the mobile app.

Fixed deposits and high-interest rate savings accounts offer almost the same interest rates per annum. Still, the former lets you hold out your funds within a specific period while the latter allows you to withdraw funds anytime.

So, which one should you choose? In this article, you’ll learn more about these two types of accounts, their pros and cons, and more.

Fixed deposits vs high-interest rates savings at a glance

Bank Interest Rate Per Annum Amount Placement
  • 2.5% — 4.00%
  • Available daily balance of P20 million and below (4.00% p.a. is within a promo period)
  • 0.50% — 4.00%
  • UpSave and GSave accounts with at least P100,000 earns an effective interest rate of 4.00% within the promo period
  • Based on market rates
  • P1,000 above
  • 0.1250% — 0.3750%
  • 0.2500% — 0.5000%
  • P50,000 — P5 million above
  • 0.1250% — 0.500%
  • Contact bank for updated rates
  • P1,000 — P20 million above
  • P100,000 above
  • 1.100% — 1.450%
  • Based on 3-month Bloomberg Valuation Service
  • P5,000 — P5 million above
  • P50,000 above
  • 0.625% — 1.00%
  • 1.625% net
  • P10,000 — P10 million above
  • P10,000 above
  • Contact branch for updated rates
  • P25,000 +
  • 0.125% — 0.625%
  • P10,000 — P20 million above
  • 0.250% — 0.875%
  • 2.2500%
  • P10,000 — P10 million above
  • P50,000
  • 0.250% — 0.875%
  • 1.875%
  • 2.125%
  • P5,000 — P10 million above
  • P100,000 — P999,000
  • P1 million above
  • 0.250% — 0.600%
  • P100,000 — P5 million above
  • 0.125% — 0.750%
  • P50,000 — P10 million above

As of writing, these are the prevailing interest rates, all subject to change. You may visit the bank’s official website for the most updated rates.

Fixed deposit accounts require a minimum amount placement to earn interest. If we will base it on the table, the highest interest rate is RCBC’s 5-Year + 1 Day Time Deposit at 2.125% p.a. with a minimum placement of P1 million.

ING Philippines and CIMB Bank offer attractive interest rates for regular savings accounts, ranging from 0.50% to 4.00% p.a. As long as you meet the bank’s required average daily balance, you’re bound to earn 4.00% within the promotional period.

However, there are pros and cons if you choose fixed deposits over digital banks’ savings accounts and vice versa. Read further below.

What are the pros of fixed deposits?

Fixed deposits reduce the temptation to withdraw your funds within the holding period. Some local banks like AUB and BDO offer affordable initial deposits, making it possible for you to start saving for as low as P1,000.

Aside from that, you earn a fixed rate per annum and you can receive your earnings in payouts that you prefer. For example, Security Bank has monthly, quarterly, semi-annual, and annual flexible interest payouts. You may also receive earnings upon the maturity date.

Lastly, there are no upfront fees when you open fixed deposit accounts, and you can choose your holding period from 30 days to 7 years.

What are the cons of fixed deposits?

Banks charge penalty fees. There’s also the document stamp tax which costs P1.50 per P200, multiplied by the term, and divided by 365 days if you withdraw your funds before the maturity date.

If the market’s prevailing rates at maturity date are higher than what you availed, you can’t ask your bank to change them since these deposits have fixed rates.

Fixed deposits, although PDIC-insured up to P500,000, are subject to a 20% withholding tax. Long-term tenure, such as 5-year or 7-year fixed deposits, are exempted, so make sure you always check the T&Cs.

Want to learn more about fixed deposit accounts? Check out other MoneySmart articles here:

What are the pros of high interest rates savings accounts?

ING Philippines and CIMB Bank are the only digital banks in the Philippines that offer high interest rates. Most local commercial banks offer less than 1.00% per annum.

Savings accounts from digital banks don’t have a minimum initial deposit, and you can open and verify your account via mobile app.

New depositors of ING Philippines enjoy the introductory rate of 4.00% per annum within the promo period, regardless of the average daily balance.

Meanwhile, CIMB Bank offers the same interest rate per annum. However, the maintaining balance is P100,000 within the qualifying month for UpSave and GSave accounts.

CIMB Bank’s UpSave also offers you life insurance coverage with up to P1 million if you maintain an average balance of P100,000. That said, as you hold-off your money, you also enjoy this benefit without paying for monthly premiums.

What are the cons of high interest rates savings accounts?

If you can’t exercise self-control and discipline, growing your funds can be challenging if you choose to save using this method. Since your account is accessible 24/7, the temptation to withdraw or transfer funds is irresistible.

While the introductory and promotional interest rates are enticing, they are subject to change.

For instance, if you save your money in ING Philippines, you earn 4.00%, but once the promotional period is over, you will earn 2.5% afterward.

Just like fixed deposits, your savings are subject to 20% withholding tax.

Short term vs long-term financial goals

Do you plan to grow your money for a short-term period? The way to earn a high interest rate from 30 to 365 days is opening a savings account at ING Philippines or CIMB Bank and exercise self-control on spending.

Take advantage of the promotional rate at 4.00% p.a. With the UpSave or GSave account on CIMB Bank, especially if you have more than P100,000. Plus, if you prematurely withdraw your funds, you don’t have to pay the document stamp tax and penalty fees.

However, if you feel like you want to hold-off your money for about 3 to 7 years, a fixed deposit account is more suitable. Based on the table above, PSBank’s fixed deposit for five years offers 2.250% p.a. with only a minimum placement of P50,000.

Final Thoughts

Whether you plan to grow your money for a short or long period, what’s important is that you map out a plan to save and to grow your savings.

Digital banks’ interest rates for regular savings accounts are more competitive than traditional commercial banks’ fixed deposit rates. However, if you want to formalize the process and want a certificate of ownership, especially if you have a large amount of money, a fixed deposit account is most appropriate.

With a fixed deposit account, you will also not be tempted to withdraw your funds just like that because of the fees and taxes that go along with it.

What do you think of these fixed deposits and high interest savings accounts? Let us know in the comments below.