Wednesday, October 19, 2016

GMGH's DBS / POSB Cashback Bonus Review

After reading this post by Budget Babe, I decided to check out the DBS/POSB Cashback Bonus Programme.



Honestly, it looked promising at first, until I read the finer details and used the calculator to find out my estimated cashback. I was not impressed.

First off - eligibility.

The requirement of jumping through 3 out of 5 hoops is actually not as easy as one would like. Although Mothership and their sponsored post positioned this programme to be "since you're doing it anyway..." in reality, I would imagine that most people do not qualify naturally to be in their programme.

1.1 Salary Credit.
You need to credit a MINIMUM of $2,500 to your account. If you reverse engineer this amount and take into account CPF contributions, your gross salary has to be at least $3,125. Not something everyone can do. I know grads that don't touch the $3k level.

1.2 Credit Card Spending
Okay, the good thing is that they don't mention a specific minimum. This means that just charging $1 a month ought to qualify as a single transaction. The downside is that it has to be a credit card, and not the debit card that all of us have. That's 1 extra card to maintain in your life for no good reason, especially since the bank promotions extend to the debt cards as well.

1.3 Home Loans
Meh. DBS only has a market share of the loan market of about 25%. Good for you if you're that 1 in 4. If you're not, I don't think refinancing with DBS just for this cashback would be worth it, but do your math. Maybe it is.

1.4 Insurance
If you buy your insurance through the bank, you're already being screwed. There is no back-dating, so this only applies to new policies. And this is a key point: Only the premiums for the first 12 months will be recognized.

1.5 Investments.
Again, if you buy your unit trusts through the bank, you're already being screwed. Same thing, no back-dating of investments. Same thing, it's only recognized for the first 12 months. This is ONLY worth doing if you've been planning to start with POSB Invest Saver and have been lazy to begin. It's a good encouragement to get you to finally do something that you've been wanting to already do. However, for people who have no idea about investing and want to start just to chalk up a tick in this category, it is not advisable to buy something you don't know.

So, straight off the bat, qualifying for the insurance portion is out unless you're crazy. The investment portion through Invest Saver is only good for 12 months and if you haven't started and was already planning to. The loan portion excludes 75% of people. The salary is probably doable, but it should not be assumed that everyone can do it. The only really easy hoop to jump through is the credit card spending hoop, and that's a shitty hoop that just complicates your life.

Now, let's talk about the "Cashback".

If you're going to GIRO your salary into your account, getting a shitty 0.3% OF THE SALARY AMOUNT just doesn't cut it DBS/POSB.

OCBC gives 1.25% on balances up to $60,000 with $2,000 salary credit.
BOC gives 1.25% on balances up to $60,000 with $2,000 salary credit.
SCB gives 1% on balances up to $100,000 with $3,000 salary credit.
CIMB gives you 1% on balances up to $50,000 without doing anything at all.

I'm sorry DBS/POSB, but why the hell would anyone credit their salary to DBS/POSB for this shitty 0.3% on the salary amount? It is so much easier to open up an OCBC/BOC account and deposit your salary and get 1.25% on their whole balance (as opposed to only the salary amount), or have zero stress at all and just normal bank transfer to CIMB and get 1%.

The credit card 0.3% cashback is very lame. The normal DBS/POSB debit cards give you 0.3% cashback with no limits.

The 3% for home loans caps at $30, which means the optimum and maximum loan amount is $1000. Still, money is money and this is the only cashback reward that I actually like.

Insurance is bullshit and if you buy it, you cannot be saved. 10% cashback also not enough.

The 3% for the investments is all right, especially if like I said, you were already planning to do it from the start. It's a good cashback amount and you're probably making while the bank is losing money on this, but that's why its limited to just 12 months.

Review Summary

This cashback programme is shit.

Unless you already have a home loan with DBS and already credit more than $2,500 of your salary to your DBS/POSB account, you're not going to meet the eligibility. If you do, then spend on something once a month of your credit card and you're good to go.

You should not think of taking up insurance or investments through the bank. If you want to buy insurance, DPI is the cheaper way to go. The amount you save will be much much much much much much much much more than the shitty 3% premium rebate which you only get for 12 months. If you want to invest in unit trusts, do it through Phillips where the sales charge is either 0.75% or 0%. It's like having a permanent rebate from the banks' usual 3% charge.

In all honesty, if you qualify for this programme, it's most likely because of your $2,500 salary credit. In that case, you're an idiot for being in this programme instead of opening accounts with OCBC/BOC/CIMB and getting a higher interest on your entire balance instead of just a rebate on your salary.

The main beneficiaries of this programme are DBS/POSB staff who are forced to credit their salary into their accounts. LOL.

Much of the talk is about how this programme gives you cashback without you having to do much. However, if you're going to sign up for this programme and jump through some hoops, you're honestly MUCH better off going to other banks that will give you much better interest for your banking relationship with them.

Bottomline: this is a bullshit programme and it ticks me off that DBS/POSB thinks that pop-art graphics and a cheesy marketing campaign will make up for their crappy product offering. Attention to millennials being targetted: if you fall for this, you're beyond hope. This programme is actually almost insulting.

DBS/POSB is already behind the curve by having such a ridiculous Multiplier programme which close to no normal people can qualify for. Now they are trying to trick unsuspecting people with this cashback hocus-pocus to retain customers - who should by right, if they are smart, be migrating in droves to all the other much better product offerings by other banks.

Pull the plug on this shitty programme or beef it up so that it's actually something worth getting. Give interest on the whole balance if the salary credit requirement is hit. Give a proper cashback or rebate to actually encourage credit card usage, as opposed to cannibalizing on your own debit cards. Upsize your home loan rebates to get people with higher mortgages (and thus, higher opportunity cost) to refinance with you. Don't limit your insurance and investment rebates to just the first 12 month. Adjust your investment rebate because 3% for Invest Saver is just silly and loss making. No worries DBS team, all this consultation is on the house.

Personally, I think DBS/POSB is pretty shit. I only use them because of their ATM network and for random promotions that they sometimes have. I legit have less than $1,000 in my bank account with them, and even then I feel like I'm holding too much cash with them.

Honestly, I would love banks to come at me to publicize their new products. But with shit like this, no amount of shine will turn it to gold. I can't recommend this programme to anyone because it is not something that I think anyone should be participating in.

Please correct me if I'm wrong, but I haven't seen such a bad programme since the Multiplier Programme, which is coincidentally (or not) also by DBS.

15 comments:

  1. Great article! Totally agree with you! However, its funny that some other well respected financial blogger like Budget Babe actually advertise it? Is it because she is getting paid for it or is it really worthwhile like she mention?

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    Replies
    1. GMGH is the real deal. Budget Babe got paid for it, you can see her "justification" at the end of the article. Quite crappy though.

      Delete
    2. this is why i will never bother to read budget babe. totally agree with GMGH on DBS/POSB. shitty bank which i will never put too much cash with them.

      Delete
    3. Yes, DBS is crappy - only use them for their ATM network.
      Even their CPF IS account charges one of the most - $25 annually, OCBC is about half that. WTF??

      Delete
  2. what to do.... everyone is always hungry for money....all your money....hais

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  3. Good article! I am disappointed that Budget Babe took up the advertorial because I cringed at her unconvincing article to get me to take up the POSB promotion. Not going to read her blog anymore

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  4. Thanks for your honest review! Unlike some other financial bloggers who are just keen to earn from advertorials.

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  5. Agree that the programme is generally shitty - it could be useful though, but only for a very limited group of people, in particular those who have a housing loan with POSB/DBS (and also limited savings, say < $10k in their bank account).

    Just a few points to clarify:
    Housing loan - this is based on monthly instalment and not actual loan amount. So the $1k cap on this is not exactly low.
    Salary crediting - comparing the 0.3% of salary credit amount against the interest rate for the other programmes is not all correct. The cashback is monthly so if you annualized it, it should be 3.6% ?
    And this programme would still be useful for those whose bank account is below < $10k (and there are people out there with not much savings), whereas the other programmes target benefit those with higher savings level.
    (of course you still need to meet 3 of 5 criteria, which is possible only if you have the housing loan or the investsaver. As you clearly spelled out, never insure through the bank. Even unit trust purchase would be out!)

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    Replies
    1. Hi Anon,

      After I crunched some numbers, I would like to disagree with you.

      To efficiently use up to the $1k cap at the current rates, it would have to be on a $350,000 property with a 30 year loan of $280,000. That means for people who are looking to loan more than $280,000 will not have a cashback for their monthly excess amount over $1000. While this would be useful for BTO homebuyers, there are plenty of people who need loans larger than $280k (BTO 5rm, 3Gen, resale, private buyers).

      Still, it is a good cashback, but I'm just saying that their $1k cap is low and skewed towards people with smaller loans, which means more profit from the people with big loans because they don't give so much cashback. It's a smart move for the bank, but a poor motivator for people to take up loans if they knew of this limitation.

      I did a comparison for the salary credit that you mentioned. For sure, having a larger base of savings is more beneficial when the interest rate applies to the whole account. However, even with $0 initial savings, getting the BOC or OCBC 1.25% is still better.

      With $0 savings and $2,500 credit every month, taking into account the 0.3% cashback and including the base interest of 0.05% for DBS/POSB accounts, the account would have $30,097 at the end of the year.

      With $0 savings and $2,500 credit every month, applying 1.25% from OCBC/BOC on the entire balance, the account would have $30,172 at the end of the year. That is a difference of 77%.

      The OCBC/BOC 1.25% works out to be much better, and as rightly pointed out, this only amplifies if the initial savings is larger. If the account has $25,000 starting balance, at the end of 1 year, the difference would be $55,108 (DBS/POSB) vs $55,460 (OCBC/BOC). The difference in earned interest is now 325% more. In absolute terms, that is an extra $350 for you just by choosing the correct bank to credit your salary into. This also doesn't take into account the extra bonus interest criteria (3 GIRO transactions) which are easy to rack up.

      Those with $0 savings or $25,000 savings alike would benefit by deciding to participate into another bank's salary credit promotion.

      Delete
    2. On the home loan, I had just wanted to clarify a typo in your post which had stated "The 3% for home loans caps at $30, which means the optimum and maximum loan amount is $1000", and should be referring to the instalment instead.
      Of coz, if your instalment is less than $1k, you don't get the full $30 cashback. If your instalment is > $1k, the $30 cap should be a good enough motivator (assuming similar packages offered by banks or if you already have an existing POSB/DBS home loan). Now, if most of the other banks' programmes include a home loan bonus, this would be great for those with their home loans (I think some of them may have, but I cannot remember off-hand which ones).

      For the salary credit, your comparison may not be an entirely realistic scenario too. For someone with no initial savings, it is unlikely the $2,500 credit would be building up too quickly (assuming that is the only source of income). So I am just trying to illustrate that this cashback would still benefit such a group, such as a family with a low net monthly savings. Of coz, once the savings start to build up to > around $10k, it would be worth transferring the excess to another higher yielding account, as you pointed out in your other reply below.

      Not trying to be right or wrong here, but to clarify. :)

      Delete
  6. I thought this program suits me.

    Currently, I have:

    1) UOB One (50k balance of 2.x% interest, Credit Card spending of $500 every month and 3 monthly payments)
    2) OCBC 360 (60k balance of 1.7% interest, Salary crediting and 3 monthly payments. Just cancelled my credit card as OCBC is getting strict on fee waiver. Anyway, I don't spend that much on credit card every month.)
    3) CIMB SmartSaver (50k balance of 1% interest)

    As I am getting a new place soon, I need to use around 100k cash savings. So I intend to clear out OCBC 360 and CIMB Smartsaver as they gives the lowest interest of my current bank accounts.

    My plan for the POSB Cashback Program:

    1) Credit my salary (around SGD 20 cashback every month)
    2) Bank loan (I already signed up with DBS recently so this gives SGD 30 cashback every month)
    3) Use POSB Everyday Card (Have been using it anyway for many years for electricity bills and HDB season parking as it gives some rebates. The cashback is negligible for the amount I spend every month but it helps to meet the eligibilty.)

    So all in, I get SGD 50 cash back without the need to maintain a considerable bank balance with POSB.

    The amount isn't a lot but I don't really need to do much to get it.

    I am also thinking of starting the POSB Invest Saver program with monthly purchase of Nikko STI ETF and ABF Bond. It gives a 3% rebate up to $30 monthly for 12 months.

    I am undecided on this as I am also considering using SRS to buy OCBC BCIP instead.

    But this doesn't affect my decision for now as I can still meet 3 of the requirements.

    When my cash savings go up in future and the OCBC 360 plan is still around, I will consider jumping back to OCBC for the higher interest.

    In my view, the POSB Cashback Program program is suitable for someone with the following profile:

    1) Doesn't have (or keep) a lot of cash to earn higher interest at UOB One/OCBC 360/CIMB SmartSaver/BOC
    2) Take home salary is around SGD 6.77k or more (to get the maximum SGD 20 rebate)
    3) Has an existing bank loan with POSB/DBS of SGD 1000 or more (to get the maximum SGD 30 rebate)

    Credit card can just get POSB Everyday Card. It does give some discount on common monthly expenditures - electricity bills, telcos, season parking, supermarkets.


    Obviously, this program isn't for everyone. But I think having more options in the market is good. Of course, assess carefully before jumping in.

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    Replies
    1. Hi Anon,

      Your situation is quite unique and I agree that it sounds good for your situation - if you are not planning to keep much money with DBS and already have another account that has higher rates.

      You might want to ask your HR if they can actually split your salary credit. I know companies that allow that. Eg. $2.5k to DBS, $3k to OCBC/BOC.

      Grabbing the 3% from Invest Saver just for 12 months is very tempting for me, but I don't think its worth the hassle to change my salary crediting account for 12 months and later switch it to another one. However, if you're already planning to qualify for the cashbacks because of your loan, it sounds very tempting. With the 0.5%/1% sales charge and the 3% rebate, it turns out to be a 2.5%/2% risk-free return on your investment amount.

      I would imagine that the ideal candidate for this programme:
      1) Already has home loan with DBS
      2) Is able to split salary crediting to hit the $2.5k minimum and hit another bank's salary credit minimum
      3) Has another higher yielding account (presumably with the other bank) with excess capacity to transfer out from the DBS the salary that has been credited

      This programme isn't for everybody. At least it isn't entirely useless because it will still be beneficial to certain people in unique situations. However, I would estimate that to be a very very small minority of people.

      Delete
  7. Well I was fast to sign up as currently I'm serving a housing loan under them. And $30 is better than not having anything. Have also signed up invest saver. Though they charge 0.5% and 1% for bond and equity etf, these were compensated by the 3% cash back. If there are no better deals after twelve months, can consider terminating the rsp. Works for me!

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  8. I should say only that its awesome! The blog is informational and always produce amazing things.
    SM

    ReplyDelete
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