Chasing Interest Rate

For the last few years, bank interest rate has been hovering at record low levels. In Singapore, a normal saving account yields a negligible 0.05% to 0.1% interest per annum. The supposing higher yielding Fixed Deposits accounts are also not faring any better. A 12 months fixed deposit account in Singapore dollars yield only 0.25% interest per annum.

Because of the low interest environment, putting cash into your savings accounts is not a very good option. In fact, as inflation rate is way higher than the returns from interest, you are actually poorer if you take inflation into account. For example, assuming that inflation is at 3%, a $100 product will cost $103 in one year, but if you save that $100 into a bank, it will only grow into $100.10 after 1 year (at 0.1% interest). In real terms, you are better off spending the money than trying to save it.

Nevertheless, financial planners always advocate the need to have up to 6 months of living expenses in liquid assets and this means that it is unwise to totally invest all your spare cash. The question will be, where do I park the cash?

For cash savings account, the rate offered by CIMB is one of the highest in town. Their StartSavers account offers an interest rate of 0.8% per annum if the balance of your account increases by more than $500 every month. If its less than $500, the basic interest rate is 0.5% per annum, which is considered quite decent as well. The only problem that I had saving with CIMB is that it only has 2 branches in Singapore, one at Raffles Place and the other at Orchard. Its rather inconvenient if you need to personally visit the branch.

If you are looking for a bank that has branches that are easily accessible, then OCBC will be the best alternative. Their Higher Interest Deposit Account (Bonus+) offers an effective interest rate of 0.69% per annum after averaging out all the monthly and quarterly bonus interest. Personally, I find this as a better option, as

• The 0.11% per annum interest is not going to be a lot if this is only for 6 months of emergency cash
• The large number of branches makes it easy to visit the bank if the need arise. Furthermore, some branches have Sunday banking and this makes it even easier for working folks.

What other interesting ways of chasing interest rate do you have? Do share with us by leaving them in the comments below.