On 1 Apr 2020, the top 3 local banks made announcements one after another. They all bore a similar theme- interest rates cuts on their high interest-rate savings accounts. It was not even a cruel April Fool’s joke because these changes would take effect as soon as 1 May 2020. This article summarises the reductions in interest rates made by the Singapore banks on their best savings accounts. Heartland Boy also offers his views and tips on how to maximise the interest rates on these popular savings accounts.
UOB One Account Now Yields 1.8% Interest Rate
As shown in Diagram 1 below, prior to 1 May 2020, UOB One Savings Account provides 2.436% interest rate. From 1 May 2020, this interest rate reduces to 1.796%. The cut in interest rate by UOB on its One Account is the steepest compared to the other banks. The effective reduction in interest rate is more than 0.6% and equates to almost $500 annually, assuming $75,000 in funds deposited with both criteria fulfilled.
Thankfully, the qualifying criteria for UOB One Account remains unchanged. This suggests that it somewhat retains its attractiveness despite the deep interest rate cut. UOB One Savings Account has always been popular because it is one of the rare few high-hurdle accounts that offers the option of not crediting one’s salary. Most account holders would instead opt for 3 valid GIRO transactions to fulfil the second criteria. This is exactly what Heartland Boy has been doing- he donates $5 per month to 3 different IPC approved charity organisations via GIRO. Not only is this a low hurdle to fulfil for the GIRO criteria, it also allows him to reduce his tax expenses. Getting higher interest income from the bank to perform a good deed so that others benefit too definitely sounds like a good deal to him!
Timing wise, Heartland Boy could not have got it any worse because just a week before this dreaded announcement, he finally convinced Heartland Girl to set up her a UOB One account and apply for the UOB One credit card. When this announcement broke, he shuddered at the thought of having to break bad news so soon to her. The increased interaction as a result of working from home these days also did not make his task any easier. Nevertheless, he advised Heartland Girl to stay the course as the efforts to meet the criteria for the UOB One account is almost passive based on the strategy that he had outlined above.
OCBC 360 Account Realistic Interest Rate Increases To 2.15%
OCBC has reduced the interest rates for its Spend, Step Up and Grow categories while completely removing the Boost category altogether. On the other hand, it has increased the interest rate from 2.0% to 2.4% for funds starting from $35,000 to $70,000 under the Salary category. In addition, the criteria to qualify for Salary category has also been relaxed by reducing it from a minimum of $2,000 to $1,800.
Upon analysis, Heartland Boy realized that he actually emerged better from this aftermath. As shown in Diagram 2, his probable interest rate is likely to increase from 2.1% to 2.15% after 1 May 2020.
As illustrated in this article, Heartland Boy is only able to achieve the Salary and Spend categories. (He uses OCBC 365 credit card (affiliate) to qualify for Spend category. Heartland Boy rarely qualifies for the Step-Up and Boost categories. However, he also acknowledges that it is quite common for other account holders to enjoy the interest rates from these categories. This revision is going to affect them quite significantly since Boost has been eradicated. This also puts a stop to the migration of funds on a monthly basis to artificially enjoy the Boost category.
Given today’s context where pay freeze and pay cuts are quite prevalent, Heartland Boy also like to applaud OCBC for lowering the hurdle to qualify for the Salary category. This should allow a small percentage of potential customers to now qualify for the OCBC 360 account. When compared to its competitors, OCBC is the only bank that not just took, but also gave in this round of revision.
DBS Multiplier Account Reduces Interest Rate For Income+ 1 Category Tier
DBS Multiplier Account is reducing the interest rate for accounts that could only fulfil Income + 1 Category. The interest rate cut ranges from 0.08% to 0.25% as shown in Diagram 3.
This decrease in interest rate only affects those who are only able to fulfil Income+ 1 category transaction (Heartland Boy and Heartland Girl belong to this group-credit card). For those who can achieve more than 2 categories on top of the compulsory Income requirement, their interest rates will thankfully remain intact.
Singapore Banks Reduce Interest Rates on Their Best Savings Accounts
Heartland Boy compares the interest rates that he thinks his household would realistically receive from the best savings accounts offered by the major local banks. As shown in Diagram 4, OCBC works best for his current set of circumstances.
The reduction in interest rates across the board is hardly surprising, given that the Federal Reserve had slashed rates to near zero in emergency coronavirus move. Heartland Boy prefers to see its as the glass being half full instead. With the reduction in interest rates across the major banks, returns on cash would definitely be lower. He is now even more encouraged to deploy his spare cash into the equity markets as valuations have finally begun to look attractive.
Hello Heartland boy,
I’d like to ask regarding the tax relief for the approved IPCs, I saw that some of these charities has a minimum sum of $50 donation to be eligible for tax relief. Do you happen to know if monthly contribution of $5, is eligible, considering it’s $60 for the whole year? And does the IPC period also mean that charities are only allowed to collect donation during that period of time?
Yes, monthly contribution of $5 is still eligible for tax relief. I am not too sure about IPC period, but I have been donating to IPC-approved charities and getting tax deductions for a couple of years already.
Hello Heartland boy,
Just curious if you are having multiple source of income credit to different bank? If not, how you manage to earn interest from OCBC when you mentioned that both yourself and Heartland Girl are already fulfilling Income + 1 category transaction under DBS Multiplier account? Mind sharing? Thanks! 🙂
You can refer to this article. https://heartlandboy.com/get-highest-interest-rates-bank-savings-accounts/
I credit my salary to the OCBC account, my wife credits her salary to our joint POSB savings account.
Any update to this with the latest change from ocbc
I am quite busy at this moment, but i will definitely plan an article by end June
If i pay my tax through GIRO, does it qualify as 1 transaction for the UOB one account ?
Yes, it does!