This is a continuation from my post on Singapore high yield savings accounts Part 1.
In part 2, I will share tips to evaluate the bonus interest requirements and how you can consistently meet them monthly.
The second section, I will share the pros and cons for each account, specifically OCBC 360, UOB One and DBS Multiplier.
Evaluating Bonus Interest Requirements
When evaluating each bonus interest requirement, I will mainly ask three questions:
- Can I automate the required action?
- Is the cost of meeting the bonus interest requirement low?
- Am I already doing something similar that I could adapt to meet the bonus interest requirement?
The first question removes the dependency of effort on your part. If a bonus interest requirement requires you to monitor, perform a specific action and meet a certain threshold, it increases the odds of you missing the requirement. If you can automate it, it almost guarantees meeting the bonus interest requirements consistently.
The second question evaluates whether a certain bonus interest criteria is worth meeting i.e. the benefits outweigh the rewards. Usually, the lower the cost, the more sustainable it is in the long run.
The third question evaluates the necessity of a bonus interest requirement. Are you already performing certain actions that meet the requirement as part of your day-to-day living? Can you adapt something you are already doing to meet the requirement? Or is this something that you are doing for just the sake of meeting the bonus interest requirement.
4 Types Of Transactions To Meet Bonus Interest Requirements
Typically, there are four types of transactions you can perform to earn bonus interest:
- Save: When you keep you money in the account. Incremental increase in monthly account balance or no withdrawals from the account. Step-up bonus interest falls within this type
- Deposit: When you add new funds into your account. Salary crediting requirement falls here. The difference between deposit and save is that you do not need to keep the funds in the account. You may also withdraw the funds immediately after crediting and still earn the bonus interest
- Spend: When you spend a certain amount on your credit card or make giro payments to bills or other organizations.
- Buy products from the bank: When you buy qualifying insurance or investment products from the bank or via the bank.
Let us take a look at the criteria for all three high yield savings account.
Credit Card Spend
Credit card spend of S$500 a month can be achievable consistently to a certain extent. You need to automate this as much as you can.
The trick to automating this requirement is identifying fixed expenses that you regularly pay on a monthly basis. It can be your utilities, mobile phone bill, insurance premiums, netflix subscriptions, broadband subscriptions etc etc… which you can pay automatically every month via credit card.
Overall, this is still an achievable criteria and this is a compulsory requirement if you want to qualify for any bonus at all.
Credit card spend requirement becomes unsustainable if the spend threshold is high, for example the bonus saver account offered by Standchart requires you to spend more than $2,000 to earn 1.5% p.a. interest which is an example of a high cost and low reward situation.
For those of us who are a typical salaryman or professional or civil servant, you probably receive your pay directly deposited into your bank account. So, it fulfills the automation portion (set it up once and no more effort on your end), low cost and high reward, and something necessary. You will still meet the criteria even if you completely withdrawn
If you are self-employed, free lancer, entrepreneur or simply just receive your pay via cash, then salary crediting becomes something hard to fulfill.
3 Giro Transactions
The advantage of UOB One is that you can either meet salary crediting or make 3 giro transactions.
This requirement is easy to meet because the transactions can be of any amount and can be easily set up and automated.
Normally, you will have to pay income tax, conservancy fees, utility bills via giro. So this is already something you will have to do on a monthly basis. You can even set up monthly donations via giro of any amount to charities which you support (like how heartland boy does it in this article).
If your fixed expense alone is enough to hit the requirement, you are almost guaranteed to meet this requirement. If not, you will need to manually spend the remainder to meet the requirement. It sometimes takes a conscious effort to use the card.
My Take on UOB One
UOB One used to be the best in my opinion as the requirements were easiest to meet among the three other banks and returned almost 2.45% p.a. With the reduction of rates come May 2020, the rates drastically reduced to 1.846% p.a.
Another point to note is that in order to hit the yield of 1.846% p.a. you will need to fully deposit $75,000. The interest rates only start climbing rapidly once you deposit more than $60,000. If you only deposited $60,000, you will expect to only get 1.325% p.a.
That said, overall the requirements are easy to meet and not having a compulsory salary crediting means it can be used as a secondary account to complement either OCBC 360 or DBS Multiplier.
Salary Crediting And Credit Card Spend
I already talked about these two requirements in the UOB One section. But if you already meet the requirements for UOB One, you will definitely meet the requirements for OCBC360 and earn an effective interest rate of 2.15% p.a. compared to UOB One of 1.84% p.a. So I will recommend you prioritize OCBC 360 over UOB one if you met this criteria.
This requirement falls under the save category which can be automated to a certain extent as well. Usually, you will spend less than you earn. But the difficulty comes with maintaining more than $500.
One method of automating is to create a secondary account for all daily transactions. Use you OCBC 360 purely for savings and do not touch the balances. Every first day of the month, you transfer $500 from the secondary account to your OCBC 360 account. You should also set up automatic transfers to transfer out your salary once it is credited.
This method does not incur cost. However, there are also diminishing returns of interest rates when your deposit increases beyond $70,000 and you have high opportunity cost of not having the extra cash to invest.
My recommendation is to accumulate a certain amount, e.g. $5,000 after 10 months. So once you had accumulated $70,000 in your OCBC 360, you continue the step-up automation for 10 more months till you accumulated $75,000. Then withdraw that amount and use it to invest a lump sum to reduce trading commissions cost. You will lose the bonus interest for one month but you will get to restart the step up process again. It can be any amount, $5,000 is just an example.
To answer the third question on necessity, step-up is necessary if you have no savings. But if you had already saved enough, you will be losing opportunity cost by not investing your extra savings.
Wealth And Growth
For the wealth category, you will need to purchase a minimum sum of certain qualified products – insurance plans and investment products. If you need an insurance plan, sure, then why not take advantage of this and get 12 months of wealth bonus.
For the investment section, only unit trusts or bonds or structured products are qualified. Unit trusts are usually higher cost in order get an effective rate of 0.9% p.a. Well, the banks are not charities so it is likely that they will incentivize you with bonus interest to buy more expensive products that earns them a higher commission.
The Growth category has very high opportunity costs but low return: 0.8% p.a. on the first $70,000 which means the bonus interest I will earn is 0.28% p.a. on $200,000.
My Take on OCBC 360
OCBC 360 offers the best interest for just fulfilling two criteria – salary + credit card spend. It is easier and simpler than DBS Multiplier. OCBC 360 should be preferred when it comes to the two, unless if you have a high salary, then DBS Multiplier trounces the others.
Again, similar to UOB One, you will need to have exactly $70,000 deposited to enjoy 2.15% p.a. interest for Salary + Credit Card bonus interest.
The recent May 2020 had boosted the Salary bonus interest which means that just meeting that requirement, you can expect to get an interest rate of 1.85% p.a.(which is equivalent to UOB One after May 2020 if you fulfill all their bonus interest requirement).
For OCBC 360, the main thing to aim for is salary bonus and every other additional requirements adds up your interest incrementally. The max you can achieve is an effective interest rate of 3.35% p.a. if you meet all except grow bonus.
The grow bonus is very costly and yields very little as shown in the chart above.
Overall, a great account to start with due to the salary bonus interest.
Salary Crediting, Credit Card Spending
DBS requirements do not have a minimum transaction value. You can spend $0.01 on your credit card and meet the requirements of that category. However, DBS relies on the combination of your transaction costs. So if you have salary of $5,000 and credit card spend of $0.01, you eligible transaction amount is $5,000.01 and met 1 category – you will get 1.8% for your first $25,000.
However, if your total eligible transaction amount is less than S$2,000, your bonus interest is basically nonexistent i.e. 0.05%.
There is also two main differences between the salary crediting of DBS Multiplier with the other two accounts:
- Income (Either salary crediting or dividend received) is compulsory for DBS whereas not so for OCBC 360 or UOB One
- You just have to credit your salary to any DBS/POSB account for you to qualify for salary crediting. Whereas for OCBC 360 and UOB One, it is specified that you have to credit your salary to the respective account.
Hence due to this, if you are married and you have a joint DBS/POSB account with your spouse, one of you could credit your salary and if both of you have a DBS Multiplier Account each, you will both qualify for the income requirement.
Home Loan Instalments
This is actually a pretty good criteria in my opinion. Usually we would take up a home loan and if you are planning to buy a house, why not consider taking up a loan with DBS and earn some bonus interest? This is a recurring transaction and a necessary one if you want to own a home.
Insurance And Investments
This differs from OCBC wealth category as DBS allows Invest-saver to qualify for investments which is a regular savings plan which allows you to buy either the Nikko AM Bond ETF or Nikko AM STI ETF. DBS also allows any buy trade you fill in DBS Vickers to qualify. This is how I qualify for the maximum interest for a month because I had placed a lump sum trade on DBS Vickers. It is not sustainable though.
The other difference is DBS only counts the monthly premium payments or investment amount. If you meet OCBC wealth criteria, you get the bonus interest for 12 months straight. However for DBS, you still have to pay or invest some amount every month to qualify. So it requires maintanence.
My take on DBS Multiplier
The rich gets richer. DBS Multiplier adheres to that philosophy. If you managed to qualify for the highest total eligible transactions tier, you will get proportionally a larger boost to your interest compared to the second highest tier. Refer to the charts below.
After May 2020, the income + 1 transaction category bonus interest rates are much lower than income + 2 or more transaction categories. The number of categories has a more significant effect on your bonus interest compared to the transaction amount tiers which increases very gradually from tier to tier (unless it is between the top tier >$30,000 and the 2nd top tier $15,000 – < $30,000 which has a significant difference)
The other key observation on the DBS bonus interest structure is the income + total number of categories matters a lot with your deposit amount. Generally:
- For deposit amounts below $50,000, you will need to fulfill at least income + 2 transaction categories because the rates are massively higher
- For deposit amounts above $50,000-$100,000, you will need to fulfill at least Income + 3 transaction categories, otherwise you will not get any bonus interest beyond $50,000.
DBS had extensively marketed its DBS Multiplier as the best and indeed it has the potential to provide the most amount of interest payments. However, that comes at a high cost literally with >S$30,000 worth of transactions and figuratively with its most complicated bonus tier structure that makes it hard for a regular saver to keep track of all categories and total eligible transaction amounts.
Salary is the main factor to contributes your eligible transaction amounts hence you should expect the bonus interest rates to correspond with the tier that is within the range of your salary amount. For example, if you earn $3,000 you can expect to qualify for the $2,500 – <$5,000 tier or if you earn $5,000, you can expect to qualify for the $5,000 – <$15,000 tier. After identifying that, you should plan to fulfill the number of transaction categories according to how much you plan to deposit.
Realistically, most of us are going to fall within tier 2 ($2,500-<$5,000) and tier 3 ($5,000-<$15,000), so the expected average rate is 2.0% p.a. to 2.2%p.a. if we manage to fulfill income + 2 transaction categories.
My take is, unless you have a very high base salary >S$15,000 monthly, it is going to be difficult to outperform OCBC 360 because the higher tier bonus are where it outperforms the other banks.
UOB One requirements are easy to fulfill and does not require salary crediting to meet the full requirements which makes it a good choice as a secondary account to complement another high yield account. The point to note is that you will need to deposit within $60,000-$75,000 to get the optimal bonus interest rates. Since it gives the lowest max bonus interest rates among the three accounts, you should always aim to fulfill all requirements.
OCBC 360 is a great account which has a more straightforward bonus interest structure and easier requirements to fulfill compared to DBS Multiplier. You should always aim to credit your salary because that alone already yields 1.85% p.a. (Due to boosted bonus after May 2020) Any other requirements you fulfill on top of it adds up to your final bonus interest proportionally. The optimal deposit amount is $70,000.
DBS Multiplier is a bit more complicated but mastering it will give you potential better bonus interest rates than the other two. For DBS multiplier, salary is the main factor to contributes your eligible transaction amounts hence you should expect the bonus interest rates to correspond with the tier that is within the range of your salary amount. For example, if you earn $3,000 you can expect to qualify for the $2,500 – <$5,000 tier or if you earn $5,000, you can expect to qualify for the $5,000 – <$15,000 tier. After identifying that, you should plan to fulfill the number of transaction categories according to how much you plan to deposit.
For me, the no brainer choice is OCBC 360 first if you do not have a high income. OCBC 360 offers the best interest for just salary crediting and credit card spending. However, if you are a high income earner, then DBS Multiplier will look more attractive.