Sunday, April 6, 2014

SCB Bonus$aver, DBS Multiplier and OCBC 360

12/5/2014 Update: I got the bonus interest from OCBC 360 credited into my account!
15/4/2014 Update: New post regarding the OCBC 360 Account in detail!

When people think of risk-free options, people generally think of US Treasuries. But in Singapore, people don't really see it that way. Instead, risk-free options to people are only fixed deposits (FDs) or savings accounts (SAs).

For the past few years SA interest rates are beyond ridiculous. The local banks give only 0.05%. The other bigger banks like SCB give marginally better rates, between 0.1-0.2%. The best rates are in fact from the regional non-Singapore HQ banks, such as Maybank, CIMB, RHB and even BOC, with better rates at roughly 0.4%.

All-in-all, the SA playing field in Singapore has been pathetic, to put it nicely. The best rates are currently coupled with lots of additional requirements and don't really seem to be like a savings account. I'll write more about this after the Fixed Deposit rant.

So, FDs in Singapore are widely popular, especially with the older folk. Risk-free, but with higher interest rates, they just love it. A popular strategy for the ever fearful is to split up your savings to $50,000 lots and invest in different banks when they have different promotions. The main driving rationale is the fact that only the first $50,000 of any deposit in Singapore is insured under the SDIS.

All non-promotional FDs are never ever looked at by the average Singaporean. Unless it is a special rate, no one bothers. The standard FD rates in the local banks are worse than the SA rate in the non-local banks, it is really depressing to look at. However, there is a website, aptly named Singapore Fixed Deposits, that is regularly updated when there are FD promotions, alerting people about the latest rates offered by the different banks, as well as the terms.

Just eyeballing it, the average rate is about 1% for a 12 month deposit of minimum $20,000. Usually the rates can inch up higher with a larger minimum amount, but the marginal increase in interest rate is well, marginal. So, for the average person with $20,000, the best risk-free option seems to be putting it in a FD with a bank during a promotion, right?

WRONG.

Oh gawd, I sound so pompous and pretentious when I did that, haha. Don't mind me, I'm just a bit excited, haha.

Now, back to the Savings Accounts that are not really like savings accounts. Why do I say that? Well, some of the banks are offering bonus interest rates on account balances if certain criteria are met. The most common criteria is spending a certain amount of money. The extra interest offered is actually quite substantial in some cases. Let me list the options we have available today.

Standard Chartered Bank Bonus$aver


So, here is SCB and their account offering the added interest. Basically, all you have to do is charge $500 to a linked credit/debit card a month, and you will get 1.88% on the balance in your account, up to $25,000. Although the name sounds misleading, from my investigation, you are not required to credit your salary into this account to be eligible for the promotion.

DBS Multiplier Prgramme

By and large, this is the crappiest account ever. The interest rate received is pathetic and an insult to anyone who has these kind of cashflows. If your cashflows are less than $20,000, you're better off opening up an account with SCB and charging $500 to your SCB credit card. Only after you've cleared the $20,000 hurdle, do you get interest rates better than SCB. However, the plus side of this account is that the interest is payable on the first $50,000, as opposed to only the first $25,000 at SCB.

Personally, I think this account is a farce and only very specific individuals would be able to take full advantage of this account to its full potential. Definitely not even worth a look unless your monthly income is over $10,000.

OCBC 360 Account

Just announced today, this account has received the attention of Singaporeans almost immediately. Even my dad knew about it. The likes of 15HWW and InvestmentMoats have already given their 2 cents on this account.

There's no need to compare to DBS, they are completely blown out of the water regarding this. Compared to SCB though, the advantage is still very obvious. If all you did was to credit your salary to OCBC and spend $400 ($100 less than SCB!), you would already be eligible for 2.05% on your account balance. If you paid extra 3 bills every month, you'd get an extra 1%. The main kicker here is that up to $50,000 is eligible to earn interest on!

How to milk these babies for what they are worth

1. Credit your salary to OCBC
2. Pay 3 bills on OCBC
3. Spend $400 with OCBC credit card
4. Spend $500 with SCB credit card
5. Deposit $50,000 with OCBC
6. Deposit $25,000 with SCB

Annual interest earned on $75,000 cash = $1995

Therefore, as long as you have at least $75,000 that you would like to hold in cash, this is the most optimum way of earning the highest risk-free returns on them. It will only set you back $900 a month + 3 bills. It shouldn't be too hard if you are holding onto $75,000 cash instead of investing it! Cash holdings should not be more than a few months of living expenses. However, I must concede that given this strange investing environment, holding extra cash is not necessarily a bad idea.

Summary
I have been looking for a suitable risk-free alternative that gives me good rates. I will definitely be opening up an OCBC 360 account based on this, and I will get my salary to be credited into my OCBC account to generate 1.05% risk-free. Who the hell needs fixed-deposits now?

If I can, I will try to hit the extra 1% hurdle of spending $400 a month and earn an extra 1%. Each 1% is worth about $41 a month if the account has $50,000.

Finally, I think then I will move back all my cash equivalents to this account, selling off my STBF units and move back any cash balance into this OCBC account and earn a risk-free 1%. I will also get this OCBC account linked to my DBS, SCB and POEMS so that I can make quick transfers.

Sorry DBS, but your days are number. I will be looking towards downgrading my account completely to the DBS Remix eSavings Plus so that I will have no fall-below fee. I will have nothing but maybe $1000 dollars to cover my insurance deductions and for ATM withdrawals. Times are hard and you don't seem to be changing with the times.

Disclosure: I am a client of DBS, OCBC and SCB and I do have banking facilities with all 3 banks. I am not paid to review their products and my opinion on this matter is solely my personal expression on this subject. Please conduct more independent research before making any decisions that may have been unwillingly suggested from this blog post. Please read the disclaimer on the left side bar.

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