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Singapore Banks Reduce Interest Rates On Their Best Savings Accounts

singapore-banks-reduce-interest-rates-on-their-best-savings-accounts

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.

uob-one-account-1-may-2020-interest-rate

Diagram 1: Interest rate for UOB One Savings Account pre and post 1 May 2020

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.

ocbc-360-account-1-may-2020-interest-rate-drop

Diagram 2: Heartland Boy’s probable interest rate from OCBC 360 Account

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.

dbs-multiplier-account-1-may-2020-interest-rate

Diagram 3: Changes on DBS Multiplier wef 1 May 2020

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.

singapore-banks-best-savings-accounts-interest-rates

Diagram 4: Comparison of the interest rates Heartland Boy receives from the 3 banks

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.


11 Comments

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Comments

  1. Elyna says

    April 8, 2020 at 7:06 pm

    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?

    Reply
    • Alison_Liew says

      April 8, 2020 at 7:18 pm

      Hi Elyna,

      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.

      Reply
  2. Donald says

    May 16, 2020 at 6:54 pm

    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! 🙂

    Reply
    • Alison_Liew says

      May 16, 2020 at 7:19 pm

      Hi,

      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.

      Reply
  3. Ew says

    June 3, 2020 at 1:51 am

    Any update to this with the latest change from ocbc

    Reply
    • Alison_Liew says

      June 3, 2020 at 8:23 am

      Hi EW,

      I am quite busy at this moment, but i will definitely plan an article by end June

      Reply
  4. Kameshwar says

    December 28, 2020 at 11:40 am

    Hello,

    If i pay my tax through GIRO, does it qualify as 1 transaction for the UOB one account ?

    Reply
    • Alison_Liew says

      December 28, 2020 at 6:56 pm

      Hi,

      Yes, it does!

      Reply

Trackbacks

  1. How I Easily Saved Over $14,000 By Refinancing My Home Loan | TheFinance.sg says:
    June 14, 2020 at 11:24 pm

    […] have fallen dramatically as well. Savers would have already experienced this effect since the interest rates for the various flagship savings products had all fallen in tandem. Hoping to exact some measure of revenge, Heartland Boy began to actively monitor the various […]

    Reply
  2. How To Reduce Your Personal Income Tax Cashflow In Singapore | TheFinance.sg says:
    July 5, 2020 at 2:59 pm

    […] SRS 2.Top up your CPF SA 3.Cash top up your CPF Medisave 4. Top up your parents’ CPF Accounts 5. Donate to approved institutions Even till today, Heartland Boy is still practising a combination of these tax reliefs to reduce his […]

    Reply
  3. High-Yield Savings Accounts Reduce Interest Rates Again [Updated] | TheFinance.sg says:
    July 15, 2020 at 8:57 am

    […] 1 April 2020, the top 3 local banks announced revisions to their respective flagship savings accounts. Strangely, Heartland Boy actually experienced an increase in interest rates with the OCBC 360 […]

    Reply

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Hello there, I am Heartland Boy! I am always thinking about how I can improve my financial literacy in order to achieve financial independence. This is the place to be if you are hungry for financial independence (sometimes good hawker food as well) and foolish enough to believe in the musings of Heartland Boy. Read More…

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