Comparing DBS Multiplier Program with OCBC 360 Account

Those who have been reading my posts will know that I have been blogging about these 2 different accounts for sometime now. From my point of view, these are fantastic new products by the banks that offer higher interest rate than what they supposing "high interest account" offers.


So with limit cash on our hands, which is the better account to deposit our money into? Lets take a look at them heads on.

Overview of DBS Multiplier program

DBS Multiplier  looks at the total transaction based on 4 activities in your associated DBS/POSB accounts. These are

• Salary crediting
• Credit Card spending
• Home Loans Instalment
• Investment Dividends

Once the total for all 4 activities in your account hit and exceed a certain threshold, you will be rewarded with a higher interest rate for the first $50,000 cash in your multiplier account. Details for the interest rate can be found
http://moneychatroom.blogspot.sg/2014/03/dbs-multipler-programme-has-increased.html


In short, there is no minimum amount that you must hit for each individual activity.

Overview of OCBC 360 Account

For this account, you will be awarded a base interest rate of 0.05% p.a. for your account. In additional, the first $50,000 in your account will be rewarded with an interest of 1% p.a. for each of the following activities.

• Credit Salary of at least $2,000 per month
• Make 3 unique bill payments from this account with OCBC Online Banking
• Spend $400 on all your OCBC credit cards per month

In theory, you can get a maximum of 3.05% p.a. of interest for the first $50,000 in the account. But even if you do not hit the requirement for all 3 activities, hitting each one would already have netted you 1% of interest.

Which one is for you?

Generally, I feel that the conditions from OCBC is easier to reach for middle income worker, as they revolves around activities that you most likely will do every month, such as paying 3 bills, spending $400 on credit cards.


Although DBS does not have a minimum amount for each activity, its minimum threshold for all activities is at $7,500, which shows that it is aiming at those who are earning and spending more. They are also targeting the group that has high home loan instalment and/or high investment income.


So you will need to work our based on your earning, spending and investment patterning to see which one can give the best return for your money.


If you do not have problem hitting the all the requirements for both, the OCBC will be better as it offers a higher interest rate of 3.05%. DBS highest interest rate is only at 2.08%. Better yet, put into both if you have more than $50,000 so that you can enjoy higher interest rate for higher amount of your cash.

OCBC 360 Account

Some time back, I wrote an article about DBS Multiplier Program where DBS rewards you with higher interest based on the total banking relationship with the bank. Hot to the heels of DBS is OCBC, where they have recently launched their OCBC 360 Account.

How does it works?

It earns a base interest of 0.05% p.a. for all money in the account.


In addition, it will award extra interest in the month on the following condition,
1% p.a. on the first $50,000 in the account if you credit your salary to that account.
1% p.a. on the first $50,000 in the account if you pay any 3 bills in that month.
1% p.a. on the first $50,000 in the account if you spend more than $400 in credit card


With everything in, this means that the maximum interest rate that one can possible earn from $50,000 is 3.05% p.a. This is a very good rate, taking into account the current low interest environment that we are living in.

Conclusion

If you indeed have banking relation with OCBC, do consider using this account to increase the rate of return of your money

More companies raising funds

Recently, quite a number of companies are trying to secure loan by issuing bonds or notes. Today, Singapore Airlines just announced that it will be raising money through bonds. SIA's $500 million bonds were sold in two tranches - $200 million of seven-year bonds at 3.145 per cent and $300 million of 10-year bonds at 3.75 per cent. The sale is part of its $2 billion multi-currency medium-term note programme launched last month. DBS is also issuing medium term notes under the a US$15b medium term note program.


One of the main reasons is that Fed had indicated that interest rate will rise next spring and companies looking for long term loans want to secure as much money as possible now, when the interest rate are still low or manageable.


This may be good news for retail investors who are looking to diversify their portfolio into bonds holding. Look out for more companies that are looking to raise money through this path. I am sure more will follow in their foot steps.

Benefits of having different types of accounts

Do you find it hard to track where your hard earn money goes to? At the end of every month, do you keep asking yourself why its so hard to save any money for the month? Fear not, you are not alone. This is a very common scenario for a number of working adults. To overcome this problem, financial experts advocate splitting your monthly pay into several accounts once you get hold of the money.

Pay yourself first

The very first account is your "saving" account. Every month after getting your pay, you should immediately take out a portion of it and put into this account. Regardless of how small the amount, "paying yourself" before you spend the rest will allow you to slowly accumulate savings over the long run. Ideally, you should save up to the point where you have 6 months of living expenses. Thereafter, you can consider channelling the excess to the "investment" account.

Invest for the long run

Reader of this blog will know what I am a strong believer of investment. Depending on interest rate of savings account will never be enough to fight inflation in the long run, so its better to invest the excess to enjoy compounding effect. This is especially useful if you are young and can ride out the investment cycles along the way. Therefore, as more money start to fill into your "investment" account, you can slowly opt to invest them. I have also written another article on regular savings plan, where you pay a fix amount every month to invest in a financial product. You can check that out.

Enjoyment fund

After paying yourself and spending for the month, if you have any left over amount for the month, you can then set it aside and transfer to the enjoyment fund. I always think that its best you save up for things that you want, be it the latest gadget or your dream holiday. Its always unwise to take up debt and credit for enjoyment purposes.




After this, the whole cycle will repeat itself in the following month. Therefore, by following this, you will be sure that you will always spend within your means and not overspend.

DBS Multipler Programme has increased the interest rate!

DBS Multiplier programme encourages consumers to perform total banking with DBS. For those who are not familiar with the DBS multiplier Programme, you can check out one of my earlier posting here.

With immediate effect, DBS bank has revised the interest rates of this programme and its to the benefit of the consumers. Below are the new interest rates. 

Total Monthly Cash Flow#	Higher Interest Rate (p.a.)*
S$7,500 to <S$10,000	0.98%
S$10,000 to <S$12,500	1.28%
S$12,500 to <S$15,000	1.48%
S$15,000 to <S$20,000	1.68%
S$20,000 and above	2.08%

When compared to the old interest rates, DBS bank has raised the interest rates of the top 3 tiers. The highest tier now enjoys the interest rate of 2.08% ( up from 1.58%  previously). This certainly makes things even more compiling to consolidate all financial transactions with DBS now.

Vicious Cycle in Property Market

Recently months, Singapore property market had witness a slow down in transaction volume. Although prices have remained somewhat stable, most experts in the sector have predicted that property prices are set to fall. They have indicated that property prices will fall between 10% to 15% before the end of the year.


These experts are not only from the property sector, even financial experts from Banks are singing to the same tune. They strongly recommend buyers to withhold their purchases if they can until the price drop.


From the way I see things, its going into a self fulfilling vicious cycle. Basically, prices are not moving at the moment. By encouraging buyers to hold back, demand is essentially cut. This leads to more people staying in the side line, as they do not want to buy a property that will lose value straightaway. This in turn further cuts the demand for property and a vicious cycle ensures. This is exactly the opposite of what happens in a bull market.


As no one really knows when the market will bottom, so I think the best way to approach this issue is to buy when you have a real need for it. When you are living in the property that you purchase, near term price fluctuation will be less meaningful, as you are in no hurry to sell anyway. And over the long term, I still believe that Singapore's Property market will remain strong, as long as our economy is doing well, as land is definitely a scarce product here.

Power of Compounding Interest

Investment advisors often advocate us to start investing while we are young, so that we can benefit from the power of compounding interest. But a lot of you may ask, "what is that"?


The idea behind this is very simple. After the investment of an initial principal sum, you will receive some interest from it on an annual basis. Subsequently, you will reinvest this interest in the product so that you can receive even higher interest on the next year. This cycle is repeated until you stop your investment. Lets do some simple calculation.


Imagine that you have a principal sum of $10,000 and the annual interest from your investment is 5%.


End of year 1, you will have obtained interest of $500, from a principal of $10,000.
End of year 2, you will have obtained interest of $525, from a principal of $10,500.
End of year 3, you will have obtained interest of $551, from a principal of $11,025.
End of year 4, you will have obtained interest of $578, from a principal of $11,576.
End of year 5, you will have obtained interest of $607, from a principal of $12,154.
End of year 6, you will have obtained interest of $638, from a principal of $12,761.
End of year 7, you will have obtained interest of $670, from a principal of $13,399.
End of year 8, you will have obtained interest of $703, from a principal of $14,069.
End of year 9, you will have obtained interest of $738, from a principal of $14,772.
End of year 10, you will have obtained interest of $775, from a principal of $15,510


At the end of 10 years, your principal plus interest will amount to $16,285.
This is effectively about 62% of your initial investment amount.


However, if you do not reinvest the interest, you will only be getting $5,000 of interest over 10 years, which amounts of 50% of the initial investment amount.


So comparing the 2, you will have obtained about 12% more of the original invested amount over 10 years just by reinvesting the interest! So it certainly pays to reinvest your interest if possible. The hard part is to make sure that your investment can constantly generate yield at that percentage.