Cash is king. Indeed, we had experienced this in the recent COVID-19 health crisis.
This is why we need to have an emergency fund just for times like this.
Keeping cash does not always mean accepting low yield thanks to the availability of high yield savings accounts that pays decent interest while giving you plenty of liquidity and flexibility.
Usually, a high yield savings account will promise additional bonus interest on top of the base interest rate if certain requirements are met. Some requirements require the customer to perform certain actions, e.g. crediting salary, completing giro transactions or meet certain transaction volume thresholds ,e.g. minimum spending of $500 on your credit cards monthly.
With interest rate plummeting to all-time lows due to central banks intervention around the world, it is not surprising that banks had started reducing interest rates in retail deposit accounts.
A slew of local Singapore banks started announcing interest rates cuts in their high yield savings account offerings.
In this post, I would just like to focus on the announced changes of high yield savings accounts of the three local banks in Singapore – OCBC 360 Account, UOB One Account and DBS Multiplier.
I will share a spreadsheet to compare the interests from each bank account and show how much interest we could expect to get post the revision of interest rates.
In this post, I will only consider optimizing for a single account – if you only wanted to create one account, which account will give you the best bang for your buck.
For the multiple accounts scenario, we will discuss it in another post. It is possible to combine multiple accounts and squeeze out additional interests.
Without further ado, let’s go into the various account requirements and interest rate revision post May 2020.
Bonus Interest Requirements
The bonus interest requirements vary from bank to bank. In this post, I will assume that you are already familiar with the existing requirements and their respective bonus interest rates.
For OCBC 360 account:
- Salary crediting of minimum S$2,000
- Minimum credit card spending of S$500
- Increase your monthly average by S$500 or more compared to last month’s average
- Buy certain investment products or insurance products from OCBC
- Maintain a monthly average of S$200,000 or more.
The revision of rates will increase the salary bonus but reduce the step-up bonus, spend bonus and remove boost bonus completely. See below:
For UOB One account:
- Minimum credit card spending of S$500
- Salary crediting of minimum S$1,800 OR 3 monthly GIRO Transactions
UOB One account has the simplest requirements and a maxed out bonus interest yields around 2.4% p.a. After the May 1 rates revision, the effective interest drastically reduces to 1.8% p.a. This Heartland boy article talks about it. Note that in the article, Heartland boy did not include the base interest in his calculation, after adding up the base, it will amount to around 1.84%.
See below for details:
UOB has done a better job in announcing the changes in UOB One account rates – it is announced prominently on their main page. Good job on that.
More details of UOB One Account on their main webpage here.
For DBS Multiplier Account:
- Compulsory Salary Crediting of any amount (Dividends received also counts as income)
- Credit card spending of any amount (more than S$0)
- Monthly home loans payment of any amount (more than S$0)
- Monthly investment of any amount (more than S$0)
- Monthly insurance premium payment of any amount (more than S$0)
DBS Multiplier Account offers the most potential bonus interest but it is very difficult to meet all the requirements to obtain the maxed out bonus interest. A more realistic bonus range is around 2.2% p.a. DBS Multiplier had undergone a revision earlier this year. The recent May 1 changes, the second rate revision this year, reduces the bonus interest for the 1st category.
DBS has also done a better job in announcing the changes in their interest rates for all their deposit accounts – it is also announced prominently on their main page.
More details on DBS Multiplier Account is found in their webpage.
The Best Account Really Depends On Your Situation
With that said, I had created a spreadsheet that allows you to compare between the three banks based on your inputs.
Although I will caveat that the interests calculated in the spreadsheet are estimates. For DBS in particular, their bonus interest are daily compounding but they round up to 2 decimals every day. Hence, the actual interest is lesser.
For example, for a 0.05% p.a interest, you can expect to received $5 at the end of the year if you had deposited $10,000. Not so for DBS Multiplier, because of the way they had calculated the interest amount, your actual interest is $3.65 for $10,000 deposited based on a 0.05% p.a. interest rate. This is due to the rounding of your daily amount.
Here are some scenarios and how the spreadsheet will help you calculate which account will give the best interest.
Scenario 1: Salary of $3,600, $500 credit card spent
If you were a regular salaryman receving the median of $4,500 gross monthly salary. Assuming 20% contributed to CPF, your total salary credited will be $3,600. You are confident you can meet $500 spend on your credit card and perform 3 giro transactions. You are prepared to deposit $75,000. Which account will give you the best interest?
Using the spreadsheet: You enter deposit amount = $75,000, Salary credit as $2000, spend on credit card = $500 and ‘True” for 3 giro transactions.
OCBC 360 will earn you $125.62 of monthly interest, $10.27 more than UOB One and much more than DBS multiplier’s $35.42. DBS multiplier’s poor interest is because you only fulfilled 1 category on top of the compulsory income category.
What if you had a home loan with DBS and have a $100 monthly RSP with POSB Invest-saver account?
Adding a loan of $1,500 per month and $100 for DBS investment product, suddenly DBS Multiplier becomes the best account giving you $142.71 monthly.
Scenario 2: Slightly Higher Salary, Home Loan And Credit Card Spend
What if you had a higher salary of at least $5,000 take home pay after CPF deduction? You are also able to meet the $500 credit card spend. You only want to save $50,000 and invest the rest?
So inputing these values into the spreadsheet: You enter deposit amount = $50,000, Salary credit as $5,000, spend on credit card = $500, ‘True” for 3 giro transactions.
Again, OCBC 360 continues to shine providing $77.91 monthly interest while UOB One and DBS Multiplier are much lower.
What if you happen to take up a home loan with DBS? Entering a monthly payment of $1,000 for housing loan:
The interest in DBS Multiplier suddenly becomes $91.67. This is because of the extra category of housing loan.
Scenario 3: Maxed Out At Every Category
What if a person had a high monthly salary of $20,000, credit card spend of $1,000, housing loan of $2,000 and has purchased OCBC investments products and DBS investment products. That person also plans to deposit $200,000 (just for hitting the grow bonus for OCBC 360)
You enter deposit amount = $200,000, Salary credit as $20,000, spend on credit card = $1000, ‘True” for 3 giro transactions, “True” for OCBC investments, “True” for incremental of $500 every month, $1000 investment and insurance products for DBS and $3000 housing loan payments.
OCBC 360 offers a monthly interest of $247.49 compared to $210.42 for DBS Multiplier.
Just how high will you need to max out on bonus interest DBS Multiplier? When I change the salary credited to $25,000, the total transactions for DBS Multiplier will hit the final tier of >$30,000. The final interest will look more attractive than the other accounts.
Once DBS Multiplier is maxed out, the interest becomes very attractive. But it is quite hard to hit this tier every month unless you are earning a very high monthly salary.
OCBC 360 provides the best interest if you can only fulfill the two basic categories salary and credit card spending.
DBS Multiplier may have higher interest but you will need to add on more categories to obtain the higher interest. Unless you have a very high monthly salary, it is unlikely you will be able to qualify for the higher tier of bonus interest offered by DBS multiplier.
UOB One has been greatly reduced after the revised rates. Despite its lower interest rate, the UOB One account remains a great option for those who could not fulfill the salary crediting requirement and has the easiest requirements for bonus interest.
Please feel free to make of copy of my interest comparison spreadsheet and play with it to find out which bank account gives the best interest for your own situation.
In part 2 of this post, I will share some tips that helped me meet the bonus interest requirements consistently and share my opinion on each account by OCBC, UOB and DBS.