Compilation of updated savings account interest rates amid Covid-19 recession (May 2020)

In case you haven’t got the memo, the world is in recession. Last month, the US Federal Reserve slashed their rates to almost zero in a desperate bid to shore up their crashing economy.

Singapore banks lower deposit rates in response to global Covid-19 crisis

This put our Singapore banks under a lot pressure. To make matters worse (for them, anyway), people are being extra cautious amid the Covid-19 crisis. According to a report by The Straits Times, consumer loans fell by 0.3 per cent from January to February, and dropped by 1.1 per cent when compared to Feb 2019.

This means less funds for the banks (who are also lowering the cost of loans to make them more attractive), making it harder for them to continue offering high interest rates on deposits — namely fixed deposit accounts and savings accounts.

The former is pretty straightforward: Since fixed deposit promotions are currently not as competitive, you can consider waiting it out instead of locking up your cash with a bank.

If you already signed up for a previous promotion, you would have already “choped” in the higher rate, so this doesn’t affect you.

The latter is trickier. Most of us keep a significant amount of money in our savings accounts, so interest rate changes very directly affect us.

Savings account interest rate cuts in May 2020

To see how you much you may lose (and perhaps decide whether you should jump ship), here’s a compilation of the new changes to DBS Multiplier, OCBC 360 and UOB One, effective May 2020.

Note: In case you don’t already know how these work, many of these savings accounts have different interest rate tiers, meaning how much you get depends on the transaction conditions you meet.

For example, if you do absolutely nothing, you will only get the base rate of say, 0.05 per cent p.a. However, if you do things like credit your salary or spend money on a credit card from the same bank, your interest rate goes up to over 1 per cent.

DBS Multiplier savings account (wef May 2020)

It’s an open secret that DBS/POSB is the most popular bank in Singapore. Almost every Singaporean has a DBS/POSB savings account and/or credit card. Their DBS Multiplier savings account is one of most popular DBS products.  

The May 2020 revision is just a reduction of interest rates, for the basic “income + transactions in 1 category” tier.

The biggest rate cut is for the $2,500 to $5,000 tier, which I expect most people fall in. Here’s a typical profile: $2,500 to $4,000 salary credit + $500 to $1,000 credit card spend. If that’s you, you will now earn 1.6 per cent p.a. instead of the previous 1.85 per cent p.a. 

How to maximise DBS Multiplier interest rates

As mentioned, only the basic tier is affected. If you are in the higher tiers (e.g. you have a DBS/POSB credit card and mortgage, or also invest and insure with the bank), then the rates remain unchanged.

Hence, you can try to unlock another multiplier action to bump you up to the next tier. For example, you can refinance your housing loan since SIBOR floating rates are currently low.

Alternatively, you can gun for the invest category. Unlike other banks, DBS’s criteria for this is quite lenient and you can unlock it with as little as $100 in a regular savings plan.

Note: There was a recent change in Feb 2020 as well

This change seems relatively minor compared to the rest, but only because it comes after a recent change in February 2020 that introduced a new “income” category, lumping salary and dividend crediting into one tier. The balance cap for the “income + 1 other category” tier was also lowered to $25,000 (from $50,000 previously).

The February round mainly affected those who previously used dividends to qualify for the “investment” criterion. On the flip side, it was also good for those who didn’t have a regular paycheck, but had dividends (like retirees).

OCBC 360 savings account (wef 2 May 2020)

A direct competitor to the DBS Multiplier account, the OCBC 360 savings account works in a very similar way. One key difference is that OCBC 360 doesn’t look at your transaction amount, just the number of actions you unlock.  

The interest rate cuts for the OCBC 360 account seem more drastic than that of the DBS Multiplier. The credit card spend and step-up bonus were lowered by 0.2 per cent p.a., and they removed the boost bonus entirely.

You’ll realise that the OCBC 360 account is the only one to increase interest rates. And for salary crediting, no less. That is the easiest one for most to hit.

However, do note that the increase from 2 per cent p.a. to 2.4 per cent p.a. is only for your $35,001 to $70,000 balance. The bonus interest rate remains at 1.2 per cent p.a. for the first $35,000.

The only “good” thing is that salary credit requirement was lowered from $2,000 to $1,800.

How to maximise OCBC 360 interest rates

There doesn’t seem to be a way to “game” the system to continue earning the existing interest rates. As mentioned, the only improvement is if you earn $1,800 to $1,999 monthly and previously couldn’t qualify for the salary bonus.

However, assuming that is the case, you might be better off with DBS. You’d only need to spend at most $200 on a credit card to unlock 1.4 per cent p.a., which is higher.

However, I acknowledge that switching banks is very troublesome. So there’s nothing wrong with wanting to stay put — especially if the difference in interest in minor.

If that’s your plan, you can try to maximise your interest rates with OCBC 360 by maintaining $35,001 to $70,000 in the account so you can unlock the second tier of interest rates after the first $35,000.

You can also consider investing with OCBC since there was no change in the bonus interest (1.2 per cent p.a.). However, do note that the minimum investment amount is $20,000 for unit trusts and structured deposits, and $200,000 for bonds and structured products.

If you had that kind of money, you probably wouldn’t be out here with me quibbling over “peanut” interest.

UOB One savings account (wef 1 May 2020)

For those without regular paychecks, the UOB One savings account was a popular choice as salary crediting is not required. Instead, the compulsory criterion is credit card spending.  

For $500 credit card spend only:

• Lowered from 1.50 per cent to 0.50 per cent p.a. for first $75,000
• No change for the balance above $75,000 (0.05 per cent p.a.)

In terms of “actions” to unlock, there are only 2 for the UOB One savings account.

• Tier 1: spend $500 on credit card
• Tier 2: spend $500 on credit card + credit salary
• Tier 2: spend $500 on credit card + pay 3 bills via GIRO

For tier 1, interest was lowered by a whopping 1 per cent p.a. for the first $75,000 — ouch. I suppose they are trying to incentivise customers to try and hit tier 2, but even those interest rates suffered quite a significant cut.

Interest rates were mostly slashed by 0.6 per cent to 0.9 per cent p.a., which is way more than DBS and OCBC’s, which were in the 0.15 per cent to 0.25 per cent p.a. range. It used to be relatively easy to unlock 1.85 per cent p.a., but now, you’ll need A LOT more funds.

How can you work around these UOB One changes?

To be honest, I’m not sure you can. Looking at the new interest rates, UOB seems to have completely fallen out of the race.

If you were in tier 1 because you don’t have a regular salary, then you don’t really have a choice but to suck it up. 0.5 per cent p.a. is very low, but you still won’t qualify for OCBC 360 or DBS Multiplier.

Same thing if you were in tier 2 (credit card + 3 GIRO bills). This condition is quite unique, and the other banks don’t offer bonus interest for bill payments.

However, if you were in tier 2 (credit card + salary credit), then you can consider switching banks. Both DBS Multiplier and OCBC 360 will give you better rates of at least 1.4 per cent p.a.

Bonus: SCB Bonus$aver savings account (wef 1 Apr 2020)

Standard Chartered is not a local bank, but I want to include it because the SCB Bonus$aver account is very popular and was recently revised in April 2020 as well.  

If you tally the interest rates up, you’d realise that they add up to 3.88 per cent p.a., which means that you check all the boxes, this change doesn’t affect you.

But let’s be real — most of us only use it for salary credit, credit card spending, and bill payments. Those are the categories that matter, and surprise, surprise, they’ve all been cut.

Previously, you could earn about 2.23 per cent p.a. Now, you will only earn 1.65 per cent p.a. It’s a huge downgrade, but it’s not thaaaat bad — especially if you compare with the others above.

How to maximise SCB Bonus$aver interest rates

What SCB has done to keep the maximum 3.88 per cent p.a. interest is increase the invest/insure category by 0.53 per cent p.a. to encourage customers to do more with them. If you were ever thinking of investing with them, now’s the time.

That said, as with OCBC, the minimum investment sum is quite high. For it to be an eligible investment action, it must comprise a minimum investment sum of $30,000 (or its equivalent in another currency) in a single subscription. Also, ETFs and RSPs don’t count.

Conclusion: Should you change your savings account?

Personally, I wouldn’t bother because for most cases, the difference in interest rates is quite minimal.

For example, if you’re an average Joe who was earning 1.85 per cent p.a. with DBS Multiplier previously but now must settle for 1.6 per cent p.a., I think that’s not half bad. The difference is only 0.25 per cent p.a., and who knows for how long? Banks are notorious for changing their terms and conditions anyway.

Plus, the downward trend is across the board for most banks in Singapore, which means that they are all offering similarly crappy rates.

I know it feels bad to have our interest rates cut, but I guess there’s not much to do besides wait it out.

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This article was first published in MoneySmart.