Effective from 1st Nov 2018, there will be changes to the interest structure of the OCBC 360 account. If you are either exploring deposit accounts out there or currently using OCBC 360 (like myself), you should pay attention to these changes.
Following is the existing interest structure:
It's a relatively straightforward structure that has requirements on salary crediting (which earns you 1.2% p.a.), at least 3 bill payments (0.3%), at spending $500 spending (0.3%), and investing on selected products (either 0.6% or 1.2%).
Moving forward, this is the updated structure:
Major differences between the updated and old structure are as follows:
- Introduction of 2-tiering: first 35K and next 35K
- Step-up bonus: as long as you can increase your account balance by at least $500 relative to previous month, you can earn 0.3% or 0.6% depending on tier. This step-up bonus was offered as an ad-hoc promotion sometime earlier this year (Aug and Sep 2018), but will become a permanent feature in the 360 account.
- Grow bonus: for balances above $200K, the first 70K gets another 1%.
- Boost bonus: positive delta between current and previous month-end balance gets another 1%, up to 1mil. Read carefully - it's only the difference between the month-end balances that gets the 1%, not the month-end balance itself.
- Payment bonus: no longer offered. So there's no bonus/requirement on bill payments anymore.
What's the impact on me?
I have been using the 360 account since I graduated from university in 2015. Back then I didn't really put too much thought into it, as I was damn broke anyway. I was already using the FRANK account and OCBC internet banking, so it became natural for me to move into the 360 account and get the accompanying 365 credit card.
Earning that 1.8% per annum
I never had any issues hitting the interest requirements, other than the Invest bonus. The products that can allow me to get this bonus are products that I have no interest in, such as ILPs, structured deposits, and unit trusts, and in minimum amounts of 20K. Makes no sense to me at all. Therefore, for the longest time, I have been getting 1.2% + 0.3% + 0.3% = 1.8% of interest - which is decent.
Then and now
Fast forward 3 years and my income and net worth has grown by, well, a rather pleasant amount. This also made the 360 account less and less viable for me:
- I was already drawn to the fact that my month-end balances are becoming flat-lined or dipping, simply because my monthly dollar cost averaging investments are getting higher and higher each month. With this new OCBC 360 interest structure, I will definitely not be able to consistently earn the Step-up bonus.
- The 2-tier structure means that I need to put more than 35K in the account in order to sit in the next tier, as compared to a 1-tier structure with no such requirement. Personally, the 360 account serves also as the location of my emergency funds, and I have no intention to keep that much emergency funds. 70K is too much to be able to utilize this new interest structure to the fullest.
- OCBC BCIP is still not included in the Invest bonus component. On the other hand, the DBS Multiplier account considers the POSB Invest-Saver as a qualifying investment. Seems like DBS is more progressive?
In any case, this has triggered my search for the next deposit account that can meet my needs. In the following sections, I will put together some numbers and make a decision from there. If you are using OCBC 360 account as well, I strongly encourage you to review whether this account is optimal for your needs.
After some quick research (OK, this one article summarized it all up), I will be focusing specifically on the following:
- OCBC 360 account
- DBS Multiplier account
- UOB One account
- Bank of China SmartSaver account
- Maybank SaveUp account
In addition, a special mention of the HSBC Advance programme. I won't be elaborating on it here, but do check it out.
What would be our basis of comparison?
- Interest structure, and how much interest I will be getting realistically - it may not be possible to fulfill all components in the interest structure
- Balance cap on the bonus interest - how much of my balance qualify for the bonus interest?
- Banking convenience - since I will be using this account for salary crediting, emergency funds, and everyday expenses, it's important that I can bank with this account conveniently. This means plenty of ATMs and a decent online banking system
Here we go!
OCBC 360 account
Let's start with 360 first. Based on the new structure, I doubt I can consistently get the Step-up bonus, and there's no way I will purchase any insurance or investment products from OCBC - so here's how much I think I can get. "Realistic interest rates" are in (brackets).
|First 35K||1.2% (1.2%)||0.3% (0.3%)||0.3% (0%)||0.6% (0%)|
|Next 35K||1.5% (1.5%)||0.6% (0.6%)||0.6% (0%)||1.2% (0%)|
- Realistic average interest rate for me: 1.8% (from Salary and Spend)
- Balance cap on bonus interest: 70K
- Banking convenience: High (OCBC shares ATMs with UOB and others, and I am already a satisfied user of their online banking system.)
DBS Multiplier account
The DBS Multiplier account is by far one of the most lenient accounts when it comes to qualifying for bonus interest. There are five qualifying components, namely salary, credit card spend, home loan installments, insurance, and investments. The salary component is compulsory, and for every thing else, it's based on total flow of funds across 2 or 3 components. What do I mean by that?
For example, if I have a salary credit of $3,000 per month, with just $1 spend on credit card and $1 on investments (I will explain this later), then it would be total flow of $3,002 across 3 components. This means I can qualify for 2.00% p.a. No minimum amounts on specific components, just considering total flow of funds. It's that simple.
With that, it's easy to immediately see how much bonus interest I would be getting:
- Realistic average interest for me: 2.20%
- Balance cap on bonus interest: 50K
- Banking convenience: Medium-High (POSB/DBS ATMs have the longest queues.)
On the investment component, the easiest way to qualify is via either using POSB Invest-Saver (only for the first 12 months - read the fineprint under the investment component here) or using Singapore Savings Bonds. I won't elaborate further on this here, but be sure to check out this blog post.
UOB One account
The UOB One account is pretty straightforward in their interest structure. There are only two qualifying components:
- Min. card spend of $500 in the month
- Min. card spend of $500 with either salary crediting or 3 GIRO deductions
So for most folks, hitting both should be relatively easy.
- Realistic average interest for me: 2.075% (Probably going to keep up to 60K of cash at any point in time. It's already a rather significant amount to keep in cash.)
- Balance cap on bonus interest: 75K
- Banking convenience: High
BOC SmartSaver account
The BOC SmartSaver account is probably more suited for relatively higher income earners and spenders, based on their minimum requirements of $1,500 monthly spending (1.60%) and $6,000 income (1.20%). Anything short and you would be losing out by using this account.
- Realistic average interest for me: 1.55%
- Balance cap on bonus interest: 60K
- Banking convenience: Low (in the next 3 seconds, think of a location where you can recall seeing a BOC ATM.)
Maybank SaveUp account
Finally, the Maybank SaveUp account is Maybank's attempt at competing in deposit accounts. There are 9 (!) bonus components to choose from which you would need to qualify for 3. As long as you can qualify for 3, the bonus interest would be straight out 3.0625%. Qualifying for 2 gives less than 1.20%, so the jump is tremendous.
When I was first doing my homework on all these deposit accounts, Maybank looked like the obvious choice to me - I didn't think I would have any problems hitting the 3.06%. This was until I realized that minimum monthly credit card spend of $500 - which incredulously, is a challenge for me. Yes, the amount of money I spend every month is very low and a significant chunk of my spending cannot come from credit cards - unless kopitiams and hawker centers are ready to accept them.
Therefore, unless credit card spending on insurance or income tax counts, it is unlikely that I can get the 3.06%. Which turns out to be the case.
- Realistic average interest for me: 1.11%
- Balance cap on bonus interest: 60K
- Banking convenience: Medium
|Account||Realistic average interest for me||Balance cap||Banking convenience|
Looks like the answer is clear - keep 50K of cash in DBS Multiplier account.
Assumptions / Points to note
- This turns out that a large part of this analysis hinges on an assumption of monthly credit card spending of less than $500 - which is true most of the time for me. There are definitely months where I am able to exceed $500 of credit card spending, but it's pretty inconsistent. Mostly dependent on whether there's a special occasion during the month.
- The above assumption will no longer be valid if it's possible to rack up credit card spend with insurance premiums, income tax payments, or other consistent forms of payments.
- Another assumption I made was that I would be unable to consistently increase my month end balances. This assumption is valid simply because of the presence of SSBs.
- OCBC may one fine day emulate DBS and include the BCIP into the 360 investment component. Then the 360 account would work out for me.
- Finally, do your own homework, and especially consider whether my assumptions make sense in your situation.
That's all for this post!