People have been talking about the UOB One Account and some readers asked me what I think of it. I said that I would like to see what the revamped OCBC 360 Account is going to look like and make a comparison.
Now, first, we look at the UOB One Account. At its simplest:
1. Start an account.
2. Get a UOB ONE VISA card.
3. Charge $500 a month to this card.
4. Maintain $50,000 in the account.
5. Get an effective interest rate of 1.6% per annum.
Now, if we were to credit our salary monthly or make 3 GIRO debit transactions per month, all else remaining equal, we will get an effective interest rate of 2.43%.
What I don't like about the UOB One Account is that the interest rates are tiered in the first $50,000. So, we really have to maintain $50,000 in the account to get the highest effective interest rate possible. If someone should maintain $30,000 and charge $500 to the UOB ONE VISA card, then, the applicable interest rate on his deposit would be 1.33%, not 1.6%, for example.
If we were to compare this with the old OCBC 360, this isn't really attractive because it was really quite easy to get 3.05% interest from OCBC 360 with their old requirements of:
1. Monthly crediting of salary.
2. Charge $400 to any OCBC Credit Card per month.
3. 3 online payments per month with the 360 account.
What about the revamped OCBC 360 account?
People who credit their salaries on a monthly basis will now be rewarded with an additional 1.2% interest for up to the first $60,000 in the account! Bonus interest is up from 1% to 1.2%. Total balance which will receive bonus interest is up from $50,000 to $60,000. Good stuff!
So, without having to do anything else, the interest rate on the first $60,000 is now 1.25%.
Then, just pay 3 bills online (yes, it doesn't have to be GIRO like UOB's requirement) and a bonus interest of 0.5% will apply. If we charge $500 (up from $400) to an OCBC credit card monthly, get another 0.5%. So, effectively, get an interest rate of 2.25% on the first $60,000.
|NEW: Purchase any eligible financial product of at least the minimum amount, such as Endowment of at least S$8,000 in annual premium, or investment products such as Unit Trust or Structured Deposits of at least S$40,000 to get an additional 1%.|
What about the 1% bonus interest for 12 months if we were to buy an insurance or investment product from OCBC? Er, regular readers would have the answer to this one. I won't bother with this "bonus".
For disciplined savers, OCBC 360 is going to be more rewarding too because they will pay 1% per annum bonus interest on monthly incremental balances (not the entire balance in the savings account).
Since both UOB One Account and the new OCBC 360 Account will pay us bonus interest for crediting our salary monthly, unless we have 2 salaries (each exceeding $2,000) every month, we will be wondering which product is better for us.
Ask the following questions:
1. How much do I charge to my credit cards monthly?
2. How much do I have in my savings account?
If we hardly spend any money using credit cards, the OCBC 360 Account will pay 1.25% for the first $60,000 if we simply credit our salaries monthly to the account. Paying 3 bills online is a really easy requirement to meet too. So, we will get 1.75%. With the UOB One Account, we will get nothing unless you consider 0.05% to be something.
If we charge at least $500 a month to a credit card, then, with the OCBC 360 Account, on top of what have been considered in the previous paragraph, we will get 2.25% for the first $60,000 deposited. With the UOB One Account, we will get 2.43% for the first $50,000 deposited.
In terms of interest rate, therefore, UOB trumps OCBC by 0.18%. However, remember that OCBC will pay bonus interest on the first $60,000 (i.e. 2.25% = $1,350 a year) while UOB will pay bonus interest only on the first $50,000 (i.e. 2.43% = $1,215 a year). Anything more will get an interest rate of only 0.05%.
So, if we have $50,000 in savings, go with UOB. If we have $60,000, go with OCBC.
What if we have less than $50,000? If we have less than $50,000, then, UOB's effective interest rate starts falling. Remember, UOB's bonus interest rates are tiered.
So, if we have $40,000, for example, and if we meet all the requirements discussed in the prior paragraphs, then, the effective interest rate from UOB is not going to be 2.43%. It is going to be 2.2%.
So, if we have $40,000 or less in savings, then, the OCBC 360 Account is a more rewarding choice than the UOB One Account, all else remaining equal.
I did this blog post because the question of how to choose one product or the other is a pertinent one as most of us have only one salary to credit monthly.
For those who do not have a salary to credit monthly and do not spend at least $500 a month (which could be charged to a credit card), then, the best choice could be CIMB's 0.8% interest rate for a regular savings account.
UPDATE (9 NOVEMBER 2016):
I have been too lazy to blog about the Bank of China SmartSaver which I also have. This is another product which makes people jump through hoops to get more interest income on the first $60,000 of savings.
Those hoops have just become a little harder to jump through:
|Click to enlarge.|
The changes to Bank of China SmartSaver will benefit higher income customers and bigger spenders. So, it might be good news for some people.
To find out more about Bank of China SmartSaver, go to their website.
OCBC 360 UPDATED AGAIN:
See: OCBC 360 updated (and downgraded) again.
(1 March 2017)
Getting paid more while waiting for opportunities.