Best Fixed Deposit Rates in UAE [July 2024]: Maximize Your Savings

Fixed deposits in the UAE are among the most reliable investment choices for those seeking stability and secure returns. As banks adjust their fixed deposit rates in response to changing economic conditions, it's crucial to find the best rates and terms for your savings. 

In this article, we explore the latest fixed deposit rates from leading UAE banks, offering insights to help you make the most of your investment. With a range of options and varying returns, the right fixed deposit can be the cornerstone of a well-balanced financial portfolio.

Summary:

• The best 12-month fixed deposit rate was 5.00% p.a. offered by Emirates Islamic Bank Booster Wakala Deposit, with a minimum deposit requirement of AED 25,000.

• The best 6-month fixed deposit rate was 4.80% p.a. offered by Emirates Islamic Bank Booster Wakala Deposit, with a minimum deposit requirement of AED 25,000.

• The best 3-month fixed deposit rate was 4.75% p.a. offered by Emirates Islamic Bank Booster Wakala Deposit, with a minimum deposit requirement of AED 25,000.

• StashAway’s Simple offers a projected return of 4.7% p.a., with no minimum, no maximum, and no lock-ins. 
  

Best fixed deposit rates in UAE [July 2024]

source: Bank websites as of 1st July 2024
** Limited time offer

In addition to traditional fixed deposits offered by banks, investors in the UAE now have access to innovative cash management products from robo advisors like StashAway Simple. This robo-advisory product combines the best of liquidity, competitive returns, and ease of management, making it an attractive alternative for savvy investors. 

What sets StashAway Simple apart is its flexibility; there are no minimum or maximum deposit requirements, accommodating investors with diverse financial goals and capacities. This adaptability, coupled with the convenience of automated management, positions StashAway Simple as a standout option for those seeking both growth and accessibility in their investments.

How to calculate fixed deposit interest rate

When investing in a fixed deposit (FD), understanding how interest is calculated is essential. There are two methods used by banks: Simple Interest and Compound Interest.

Simple Interest

Simple interest is calculated on the principal amount only. The formula is:

SI=P×R×T/100

Where:

• P = Principal amount
• R = Rate of interest per annum
• T = Time period in years

For example, if you invest AED 10,000 at 4% p.a. for 5 years:

SI=10,000×4×5/100=2,000

The interest earned over 5 years would be AED 2,000.

Compound Interest

Compound interest is calculated on the principal amount and also on the accumulated interest of previous periods. The formula is:

CI=P × (1+R/100×n)^(n×T) −P

Where:

• P = Principal amount
• R = Annual interest rate
• T = Number of years
• n = Number of compounding periods per year

For example, if you invest AED 10,000 at 4% p.a. compounded annually for 5 years:

CI=10,000×(1+ 4/100)^5−10,000 =10,000×1.21665−10,000=2,166.5

The compound interest earned over 5 years would be AED 2,166.5.

Calculation of Maturity Amount

To find the total amount at the end of the tenure, use:

A=P×(1+r/n)^n×t

Where:

• A = Maturity amount
• P = Principal amount
• r = Annual interest rate
• t = Duration of FD
• n = Compounded interest frequency

Fixed deposit interest can be calculated monthly, quarterly, or yearly, depending on the bank’s policies. Understanding these methods helps in selecting the best FD scheme that aligns with your financial goals.

Comparison of fixed deposit rates with other low-risk investment options

When considering low-risk investments in the UAE, fixed deposits (FDs) are a popular choice due to their guaranteed returns and safety. However, it's beneficial to explore other low-risk options that might offer better returns or more flexibility. Here's a comparison of fixed deposit rates with other low-risk investment options available in the UAE:

Fixed Deposits vs National Bonds

National Bonds in the UAE offers various savings and investment products tailored to different financial needs. These include My One Million for wealth accumulation, EIBOR Plus linked to interbank rates, Eyaali for children's savings, Second Salary for retirement income, Flexi Term for flexible investments, traditional Savings Bonds, and the Global Savings Club for international savings. 

A standout product is the Term Sukuk, which allows investors to choose investment periods of 3, 6, 9 months, or 1 year, with a minimum investment of AED 10,000. It features competitive, weekly updated expected profit rates, regular profit distributions, and capital protection under the National Bonds Mudaraba Structure, offering flexibility, attractive returns, and convenience. Below are the returns seen in 2023.

Fixed Deposits vs Foreign Currency Fixed Deposits

Foreign Currency Fixed Deposits (FCFDs) in the UAE offer investors the opportunity to earn interest on deposits held in foreign currencies such as USD, EUR, CAD, AUD, GBP and more. These deposits can be a strategic choice for those looking to diversify their currency exposure or capitalize on potential foreign exchange gains. Unlike standard fixed deposits in AED, FCFDs involve an additional layer of risk due to currency fluctuations but provide potential benefits if the foreign currency strengthens against the AED during the deposit period.

Interest rates for FCFDs vary based on the currency chosen and the prevailing interest rates in the respective countries. While some of these rates are competitive, not all FCFD rates are necessarily higher than local AED fixed deposits, which typically offer attractive returns without the currency risk. For example, FAB’s CAD deposits are slightly higher than AED deposits while other currencies are significantly lower:

• AED deposit offers 4.4% for 12-month tenor
• CAD deposit, USD deposit and EUR deposit offer 4.4555%, 3.2760%, and 3.3725% respectively for 12-month tenor

It’s important for investors to carefully consider the potential risks and benefits associated with FCFDs. While these deposits can offer attractive interest rates and diversification benefits, they are also subject to exchange rate risks, which can impact the overall returns when converting back to AED. Understanding the economic outlook and interest rate trends in the chosen foreign currency’s country can help in making informed investment decisions. 

Fixed Deposits vs Savings Account

A savings account is a bank account that allows you to deposit money, earn interest, and withdraw funds easily, offering liquidity and flexibility compared to fixed deposits (FDs), which lock your money for a set term and provide higher fixed interest rates.

In the UAE, several banks offer special rates for their savings accounts but usually with certain terms and conditions like minimum balance or opening on a certain period. For instance

• The National Bank of Fujairah’s Max Saver Account provides up to 2.50% per annum for AED deposits, with one withdrawal per month without affecting the interest rate. 
• The FAB iSave Account offers up to 3.251% per annum for deposits over AED 500,000, with no minimum balance and unrestricted withdrawals. 
• Liv. Goal Account stands out with an attractive rate of up to 4% per annum for a balance of AED 30,000 to 500,000.

Conventional savings accounts offer lower interest rates but come with various benefits.

• The ADIB Smart Banking Account offers up to 0.7184% per annum with no minimum balance requirement, along with digital banking and personalized debit cards. 
• The Emirates NBD Smart Saver Account provides up to 2.00% for AED deposits, 1.25% for USD, and 0.70% for GBP deposits, with features like multi currency support and utility bill payment options without counting as withdrawals.

Fixed Deposits vs Cash Management Accounts

The key difference between fixed deposits (FDs) and cash management accounts from robo-advisors lies in their flexibility and returns. FDs provide a guaranteed fixed interest rate for a set term, ideal for conservative investors seeking stability. However, the funds are locked in until maturity, and early withdrawals incur penalties. In contrast, cash management accounts offer more flexibility, with no fixed term or penalties for withdrawals, and potentially higher returns that vary with market conditions.

StashAway’s Simple that offers a projected return of 4.7 p.a., is a prime example of a cash management account that combines liquidity, competitive yields, and ease of management. It offers a return that adjusts with the market, typically higher than traditional savings accounts, without any minimum or maximum deposit limits. This flexibility makes StashAway’s Simple an attractive option for investors with varying financial goals and capacities, providing a versatile and modern approach to managing cash efficiently.

Factors to Consider: Choosing the Right Fixed Deposit Account in the UAE

When selecting the best bank in the UAE to open your fixed deposit (FD) account, several key factors should be considered to ensure your investment aligns with your financial goals and circumstances.

• Interest Rates: The primary appeal of an FD account is the interest rate offered. Higher rates translate to better earnings but often come with specific conditions or longer tenures.
• Tenures: FD accounts vary in tenure length, ranging from a few months to several years. Your choice should reflect your liquidity needs and investment horizon.
• Minimum Requirements: Banks often set a minimum deposit amount for opening an FD account. Ensure that the required amount aligns with your investment capacity.
• Bank Interest Promotions: Look out for promotional offers that banks occasionally provide, including higher interest rates than usual or additional perks like cashback or bonus interest for maintaining the deposit for a certain period.
• Other Terms and Conditions: Pay close attention to the fine print. Some accounts may require the deposit to be fresh funds not previously held with the bank or may have penalties for early withdrawal. Understanding these terms is crucial to avoid any unforeseen drawbacks.

Considering these factors, you can partner with the best bank to save money while effectively maximizing your funds.

Secure Your Financial Future

When choosing a fixed deposit account in the UAE, it's essential to consider factors such as interest rates, tenures, minimum deposit requirements, and any promotional offers. High interest rates can significantly boost your savings, but it's crucial to balance this with your liquidity needs and investment horizon. Understanding the terms and conditions, including any penalties for early withdrawal, is also vital. By carefully evaluating these aspects, you can select a fixed deposit account that aligns with your financial goals and helps maximize your returns.

*The projected Simple rate is not guaranteed and is as of 31 March 2024. It is based on the Gross Yield provided by the fund manager.