What Is a Fixed-Term Deposit?
A fixed-term deposit is a fixed-interest deposit placed in a bank for a set period. Funds in a term deposit account cannot be withdrawn before maturity without a penalty fee. As compensation for locking up the money, the bank pays an interest rate that is attractive relative to the prevailing market level.
Fixed-term accounts offered by banks are almost without exception covered by deposit insurance up to €100,000. It is wise to confirm the existence of Deposit Insurance before opening an account, and it is essential to understand the applicable terms. Deposit insurance is a promise to reimburse funds from the designated deposit guarantee fund if the bank becomes insolvent. Thanks to deposit protection, fixed-term accounts are a much lower-risk investment than stocks.
Foreign banks are not necessarily covered by Finnish deposit insurance. You can find more information about deposit protection on banks’ websites or on the Financial Stability Authority website.
Can You Trust Deposit Insurance?
Banks rarely become insolvent, so there is limited real-world experience of how deposit insurance performs.
The deposit guarantee scheme is considered reliable, but it is not entirely risk-free. In a banking crisis, the fund’s resources might not fully cover all deposits. If deposit insurance failed in a bank insolvency, it would be a significant blow to confidence in the entire banking system. Therefore, it is likely that losses would be compensated in some way to maintain trust.
It makes sense to diversify savings across different banks and asset types. This reduces deposit-related risks because the failure of one bank would not affect all your savings.
Read about peer-to-peer lending as a way to save.
How Much Interest Do Fixed-Term Deposits Pay?
Rates on fixed-term deposits vary with the interest-rate environment. Levels are close to Euribor, but rates differ between banks. In addition to market rates, the deposit amount and term length affect the rate. At times, rates on term accounts can approach 5 per cent, but in low-rate periods they are near zero.
Compare rates to inflation. To preserve real value, your return after the 30 per cent withholding tax must exceed inflation. At the time of writing, Finland's inflation is around 1 per cent, while fixed-term deposits offer rates above 4 per cent. Right now, locking money into term deposits even for more extended periods is a good choice.
Read our guide to getting started with stock investing.
Best Fixed-Term Deposit Rates in Finland
Rates fluctuate, so we are not listing absolute figures, but we highlight banks that, in our experience, offer competitive rates on fixed-term deposits. We recommend checking the latest rates on each bank’s website.
Lithuanian Saldo Bank
The Finnish branch of Lithuanian Saldo Bank offers excellent rates on fixed-term deposits. You can deposit funds for 6 months or longer in one-month increments. The bank operates online only, but it has Finnish-language pages. Opening an account takes 10 minutes. After signing the electronic agreement, you must transfer the funds via a normal bank transfer from a Finnish account to Saldo Bank.
Deposits fall under Lithuania’s deposit insurance (Deposit and Investment Insurance).
In an insolvency, the Financial Stability Authority implements payouts according to Lithuania’s deposit guarantee scheme guidelines.
Svea Bank
Swedish Svea Bank also offers fixed-term accounts at good rates. You can deposit for 12, 24, or 36 months. You can withdraw during the term, but the service fee is fairly high, so early withdrawals rarely make sense. You can open the account online.
Deposits are protected by Sweden’s deposit insurance authority (Riksgälden).
In a compensation event, the Financial Stability Authority carries out payments according to Sweden’s deposit guarantee scheme guidelines.
SweepBank
Maltese SweepBank, officially Multitude Bank P.L.C., offers fixed-term deposits at similar rates to the banks above. In addition, SweepBank provides current accounts and credit cards.
Despite its name and domicile, the bank has Finnish roots.
You need SweepBank’s easy-to-use mobile app to make deposits. You must first transfer money to a SweepBank current account, after which you can open a term deposit. You cannot check the rate before moving funds to the current account, which is a significant drawback.
Deposit protection is provided by Malta’s deposit insurance authority, the Malta Financial Stability Authority (MFSA). Because the bank has no branch in Finland, the Financial Stability Authority does not participate in the payout process in an insolvency.
Read our review of SweepBank’s credit card.
Bigbank
The Finnish branch of Estonian Bigbank offers excellent rates on fixed-term deposits. You can open the account online and, after signing the electronic agreement, you have a few days to transfer funds to Bigbank. The term length is not tied to whole years; you can choose it in monthly increments. The rate varies with the term.
In a compensation event, the Financial Stability Authority implements payouts to depositors of Bigbank’s Finnish branch according to guidance from Estonia’s deposit guarantee fund (Tagatisfond).
Alisa Bank
Finnish Alisa Bank was previously known as Fellow Bank. In addition to everyday banking services, the bank offers fixed-term accounts. The rates are not quite at the level of the banks above, but they are still reasonable.
Deposit protection is provided by Finland’s deposit insurance authority, the Financial Stability Authority. We cannot recommend Alisa Bank, as in our experience, their customer service was slow and somewhat unfriendly. It felt as if they did not want consumer customers.
Read the review of Alisa Bank’s credit card.
Traditional Finnish Banks
Traditional Finnish banks such as Aktia, Nordea, Danske Bank, and S-Pankki offer fixed-term deposits with varying terms. Their rates do not compete with those of the foreign banks listed above, and opening accounts is typically more traditional, even though the process is usually online.
Traditional banks sometimes have good rate offers for fixed-term deposits, but as an extra condition, they may require investments in the bank’s own funds. Those funds come with high fees, so we do not recommend taking these offers.
If you value reliability, placing a fixed-term deposit with your main bank is a good, though not the most profitable, choice. Traditional banks provide more personal service than online banks, and you can also negotiate accounts by phone or at a branch.
Large banks operating in Finland generally fall under Finland’s deposit insurance. For Danske Bank, deposit protection is provided by the Danish Finansiel Stabilitet.
Alternatives to Fixed-Term Deposits
Bank Norwegian Savings Accounts
Swedish Bank Norwegian does not offer fixed-term accounts, but its range includes Savings Account and Savings Account Plus products. They pay interest almost as much as fixed-term deposits, but withdrawals are easier. You can withdraw from the Savings Account at any time without fees, and from Savings Account Plus six times a year without a service charge.
Deposits are covered by Sweden’s deposit insurance.
Read the review of the Bank Norwegian credit card.
Alisa Bank Savings Account
Alisa Bank offers a savings account in addition to fixed-term accounts. It is similar to Bank Norwegian’s Savings Account. The rate is reasonable, and there are no limits on fee-free withdrawals. However, it does not achieve the highest fixed-term deposit rates.
Deposits are covered by Finland’s deposit insurance.
Read the review of Alisa Bank’s credit card.
Wise
Wise is an interesting option for those seeking good yields. Wise enables depositing money in euros, pounds, and dollars into interest-bearing accounts that offer competitive rates. The service was originally designed to transfer funds between currencies, but today Wise offers a range of bank-like services.
Funds held with Wise are not covered by deposit insurance, so the risk level is slightly higher.
Read the review of Wise.
Which Bank Is Best for a Fixed-Term Deposit?
If you value safety, placing a fixed-term deposit with your central bank is advisable. The rate may not be the best, but the solution carries low risk.
If you want a bit more yield, consider the foreign online banks listed in this article, which pay slightly higher rates but are usually covered by non-Finnish deposit insurance. While the approach is sound in theory, it is somewhat riskier because insolvency involves more parties, and the sufficiency of foreign deposit guarantee funds cannot be fully assured.
Online banks have optimised their cost structures, which is why they can offer better rates. Banks usually use deposits to issue short-term loans, which is a profitable business. The model is also riskier, so it is good to ensure a reliable deposit guarantee indeed backs your deposits.
We recommend diversifying deposit funds to reduce risk.
Bottom Line
Several foreign and a few domestic online banks operate in Finland. They almost invariably offer better fixed-term deposit rates than traditional Finnish banks. Opening accounts online is easy.
Good rates come with a slightly higher risk level. Even when a country’s guarantee scheme covers deposits, more parties are involved. Smaller banks often pursue riskier business models, increasing the risk of insolvency. The key question is whether the depositor trusts the deposit guarantee fund that covers these banks.
To reduce risks, diversifying deposits is important. Read the terms carefully before signing the agreement.