Which high-interest savings accounts should you open and why?
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PUBLISHED ONJune 03, 2023 6:00 AMByFiona Ling
It can be unclear how to distribute your savings and funds into a bank account, especially if it's unclear which accounts do what. Read to find out how to make the best use of the banks accounts available.
Types of Bank Account
There are four types of bank accounts: current, fixed deposit, savings, and multi-currency. Let's go through what each has to offer.
Current Account
A current account is intended to be a transactional account, and is not meant for storing money for long periods. As this type of account is optimised for more convenient transactions, current accounts can be accessed through online banking, debit cards or ATMs.
The downside of this type of account is that it accrues no interest, and typically requires you to maintain a minimum balance in the account, lest a balance fee be incurred. As such, this type of account is mainly ideal for storing funds that are used regularly.
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Fixed Deposit
Fixed deposit accounts are a low risk way for consumers to invest. They allow consumers to earn interest on funds placed in the bank for a predetermined or fixed time. One advantage of such accounts is their ease of use: deposit your money, wait for the time period and then reclaim your funds plus interest. The interest rates for different banks will vary and determine how competitive a bank's fixed deposit account is.
Savings Account
Savings accounts are generally best used for just that — savings. Savings accounts often sit in the happy middle ground between current and fixed deposit accounts. They offer a higher interest rate than current accounts, but also give you the flexibility to withdraw funds without paying a penalty.
Competitive Interest for Incremental Savers: OCBC 360 Account
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If you're willing to save at least S$500 per month, OCBC 360 Savings Account may just be your best option. Like competitors, this account offers a boosted interest rate for those who credit their monthly salary of at least S$1,800 offering interest rates starting at 2.0 per cent p.a. for a minimum salary of S$21,600.
Purchasing an eligible insurance or investment product will also boost the interest you earn on the savings account. Altogether, these bonuses add up to 6.15 per cent p.a. effective interest on top of the 0.05 per cent p.a. base rate. Any bonus interest applies up to the 1st S$100,000 of the balance (excess balance earns just the base rate).
OCBC 360 Account stands out from its competitors by rewarding continued growth. Making a monthly deposit of at least S$500 earns a bonus of up to 2.40 per cent p.a. effective interest. Overall, while several accounts reward salary crediting & product use and others reward consistent saving, OCBC 360 is one of the very few that offers bonus interest for both.
Combining all bonuses (including a 2.40 per cent p.a. bonus for large balance sizes), consumers can earn a maximum effective interest rate of 7.65 per cent p.a. with a S$100,000 balance. This makes OCBC 360 Savings Account the best in Singapore for Incremental Savers.
- Consider if: You're a consistent saver with a stable budget
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- Minimum Initial Deposit: S$1,000
- Minimum Average Daily Balance: S$3,000
- Fall Below Fee: S$2 (Waived the 1st year)
- Max Effective Interest Rate: 7.65 per cent p.a. at S$100,000 balance
Multi-Currency Account
A multi-currency account's function is quite self-explanatory. It allows the owner of the account to store different currencies under a unified account number. The primary advantage of this account type is convenience — using a multi-currency account greatly streamlines the process of managing fees over borders, whether you're a business or an individual. The disadvantage comes from the transaction and annual maintenance fees of such an account.
How do I decide what account(s) to open?
Business vs individual
It's no surprise that businesses will have vastly different needs from their bank accounts compared to individuals. However, both would generally appreciate the value of current and savings accounts.
Whilst storing the bulk of your money as either an individual or a business in a savings account will greatly increase the money you will gain from interest rates, only being able to draw money from your account twice or thrice a month is generally not tenable, and the ease in making transactions that a current account affords is often a necessity. As such, both businesses and individuals usually benefit from having both a current and savings account.
What Is the goal of your account?
What you intend for this new bank account to do for you when you deposit your funds is an important consideration. For instance, if you intend to store your funds for a period and have no foreseeable need to use these funds, a fixed deposit account may be ideal. Because these different types of bank accounts have such distinct uses and purposes, if you have a goal in mind with opening a bank account, determining which type of account to open is often much easier.
Who should open a multi-currency account?
Though the function of a multi-currency account is self-explanatory in many ways, it can still be confusing if you should open such an account, or if you make enough international transactions to make such an account worthwhile. For businesses operating in multiple countries, a multi-currency account is a no-brainer, not only for the convenience of consolidating payments from anywhere in the world to one account, but also because it allows you to make the most of conversion rates between currencies. Otherwise, for businesses and individuals alike, there are several use cases which would justify a multi-currency account.
- Sending and receiving international payments
- Employing freelancers from overseas
- Sending money to friends and family from different countries
- Working with international clients
Should I Open Savings Accounts in Multiple Banks?
In short, yes. Let's go over some advantages to opening multiple savings accounts in multiple banks.
Finding the best interest yields
Having multiple savings accounts with different banks can be a short-term investment strategy. As the interest rates of banks change over time, the bank that offers the most competitive interest rates may change. Having savings accounts in multiple banks is one way to potentially earn higher interest rates. As rates change, the money between these accounts can be moved accordingly to get the highest yields.
Making use of bonuses
A strategy that banks often use for attracting new customers is offering bonuses for opening new accounts with them. To earn this bonus, you typically have to open an account with the bank and maintain a balance for a period of time. These bonuses can be quite significant, so often it's worth putting in the effort if you have the funds to spare.
Insuring your money
Having your savings spread between multiple savings accounts is also a way to insure your money. In Singapore, the deposit insurance scheme insures S$75,000 of your funds per bank, with all full banks and finance companies in Singapore being members of this scheme. As such, splitting your savings between multiple banks in different savings accounts allows you to insure a large amount of funds.
Conclusion
Though selecting what type of bank account you should open can be difficult, having a clear goal on what you intend to do with a new bank account can usually bring clarity about what bank account you need. Click to find out more about savings and fixed deposit accounts.
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This article was first published in ValueChampion.