Is OCBC 360 Account The Most Complex Savings Account?

OCBC has announced a THIRD change in 4 years to its flagship savings account- the OCBC 360 Account. Heartland Boy remembered that when OCBC 360 Account was first introduced to the market, the product was so good it became the talk of the town on Internet forums. As a result, OCBC grabbed plenty of market share. After numerous rounds of changes, the rules have changed and the goalposts have clearly shifted. What is noteworthy is that the current round of changes is so multifarious and mathematical that it takes tremendous effort to understand and analyse them. Beyond account holders deserting the product in droves, the bank runs the intangible risk of OCBC 360 Account becoming the most complex savings account in Singapore.

 POSITIVE CHANGES TO OCBC 360 ACCOUNT

1. Effective interest rate for salary crediting has increased

Currently, 1.2% annual interest rate is awarded for the first $70,000 in the OCBC 360 Account as long as the SALARY crediting criteria has been met. From 1 November 2018 onwards, the first $70,000 earns an effective interest rate of 1.35% p.a. To be even more specific, the first $35,000 earns 1.2% while the next $35,000 earns 1.5% p.a.

This leads to a blended effective interest rate of 1.35% for the first $70,000 as shown in Table 1 as long as you credit a minimum of $2,000 as SALARY via GIRO.

2. Effective interest rate for minimum credit card spend has increased

Likewise, a similar type of change has been implemented for meeting minimum credit card spend. If the credit card spend (eg: OCBC 365 Card) of $500 per month has been met, a higher 0.6% interest rate p.a. will be awarded for balances from $35K to 70K.

This leads to a blended effective interest rate of 0.45% for the first $70,000 as shown in Table 2. Quantum wise, this represents an additional $105 each year if you have a full $70,000 deposited in the OCBC 360 Account.

3. Step-up Bonus Has Become Permanent

Once the new terms and conditions come into effect from 1 Nov 2018, a new permanent fixture known as the Step-up Bonus will be introduced. To qualify for Step-up Bonus, the account holder must increase his account average daily balance for the current month by at least S$500 compared to the previous month. Similarly, 2 tiers of bonus levels are in play. If the account holder meets these criteria, the first $35,000 will earn 0.3% p.a. of interest rate. The next $35,000 will qualify for the higher tier interest rate band of 0.6%.

This leads to a blended effective interest rate of 0.45% for the first $70,000 as shown in Table 3. Do note that this feature was introduced in the past as periodic promotions in order to entice account holders to deposit more monies with OCBC. Even then, such bonus interest was only given out to the incremental balance. Therefore, this is definitely a welcoming benefit.

NEGATIVE CHANGES TO OCBC 360 ACCOUNT

1. Online Payment Has Disappeared

Something surely got to give since OCBC is dishing out so many improvements to its flagship savings account. Well, they took away the 0.3% awarded for completing 3 Online/GIRO transactions per month. Removing the bonus interest rate awarded for online payment is significant for a particular group of people who satisfy the following conditions:

• Have less than $35,000 in their deposits,
• On a tight cashflow and unable to increase their deposits by $500 per month, and
• Had previously been able to complete 3 online transactions

As shown in Table 4, this group of account holders would see their effective interest rate fall from 1.8% to 1.5%, resulting in a loss of interest rate of $105 per annum.

Heartland Boy thinks that a majority of account holders would fall into this group.

2. Too mathematical for the layman to understand

To project a more realistic interest rate that can be achieved, Heartland Boy had deliberately omitted other Bonus Categories such as Wealth Bonus, Grow Bonus and Boost Bonus in his review. These are categories that are either not worth that extra effort or simply left for the high-achievers. When these Bonus Categories are included, it becomes almost impossible to compute the effective interest rate. Let Heartland Boy illustrate why that is the case:

• WEALTH- 0.6% for first $35,000 and 1.2% for the next $35,000 if you purchase an eligible financial product
• GROW– Extra 1% on the first $70,000 if your account average daily balance is at least $200,000
• BOOST– 1% on the incremental balance if the current month’s balance is more than the previous month, capped at $1,000,000.

Heartland Boy thinks it is irritating if an account holder cannot predict with certainty the amount of interest rate that he or she can expect to get from the savings account. There are simply too many types of bonus categories with different hurdles to meet. Too many different strokes have also been applied- whether the bonus interest applies to incremental balances, entire balances or various tiers etc.

With so much mental accounting required, the bonus interest rates may no longer justify the effort. The fundamental relationship is that account holders simply want to earn interest rate in exchange for parting with their hard-earned money. They certainly did not ask to re-take an O Level E-math paper. For those who like to check their understanding of this complex savings product, they can head over to OCBC’s website and try the OCCB 360 Account Online Interest Calculator.

Conclusion

You could tell that the pros actually outweigh the cons and that the changes should benefit consumers overall. However, when viewed in tandem with the increase in minimum spend for the OCBC 365 Credit Card, the mental accounting is simply too much to bear and it becomes a case of one change too many. Therefore, Heartland Boy has decided to relegate both products to the sideline in favour for UOB One Savings Account and UOB One Credit Card. He decided not to close this OCBC 360 Account just yet. Hence, he still maintains the minimum balance of $3,000 inside the OCBC 360 Account so that he will not incur the fall-below fee. Given OCBC’s track record, he is holding out hope that it will make a 4^th revision very soon. Even if you are still using the product, Heartland Boy thinks the maximum you should deposit should be $70,000.

Note: OCBC 360 Account has been revised once again, but for the better. Read more in this article.