When you start working, choosing the right savings account is one of the first financial decisions that you should make. A good savings account can help you earn interest with minimal inconvenience.
Wait…Why Do I Even Need A Savings Account? Don’t We All Already Have One?
Sure. Chances are that you already have at least one savings account under your name. So why do you need another one?
For the most part, those who have yet to start work are likely to be using a basic account that doesn’t provide many benefits. As a working adult, you have the options to choose much better savings account that gives higher interest rates.
Do note that some of these accounts mentioned below have higher minimum average balance required, after which, a monthly fall-below fee (usually $2) may be charged.
Let’s compare three of the best savings accounts that you should be considering.
For the purpose of our comparison, we will assume a working adult has a take home salary of $2,000, and qualify for the minimum annual salary of $30,000 required to apply for most credit cards in Singapore.
OCBC 360, OCBC
In recent years, one of the most well known savings accounts in Singapore among working adults is the OCBC 360. That’s because the OCBC 360 gives good risk-free interest rate for customers.
In the past couple of years, OCBC has revised the interest rates of its widely popular OCBC 360 savings account twice. Nonetheless, it’s still a competitive savings account that you can consider. Here are some of its perks.
- Monthly crediting of salary (min $2,000) through GIRO – 1.2% p.a.
- Pay at least 3 bills online, or through GIRO (min $150 in total) – 0.3% p.a.
- Spend at least $500 on OCBC Credit Cards (min $500) – 0.3% p.a.
- Insure or Invest with OCBC – Up to 1.2% p.a.
- Bonus Interest Applies For First $70,000
Realistic Interest Rate: 1.85% (Advertised Interest Rate: 3.05%)
We put the realistic interest rate at 1.85% because we don’t think it make sense for a person to buy an insurance or investment product just to earn an extra 1.2% interest for a period of 12 months.
The interest rates today for the OCBC 360 is not as high what it used to be in the past, where account holders can earn up to 3.05% by doing essentially the same things.
Who Should Apply:
Young working adults who just got their first pay cheque can consider getting an OCBC 360 account and to credit their salary into it. By doing so, they can immediately enjoy a 1.2% p.a. interest on their savings. The other tasks (spending $500 on credit cards & paying 3 online bills) are optional as they provide lower interest rates.
One Account, UOB
For the past few years, the UOB One Account has been the main competitor to the OCBC 360. The interest rates are somewhat similar though the UOB One Account works in a slightly different (some even say awkward) way. We will let the below screenshot do the explaining.
Realistic Interest Rate: 2.42% (based on $50,000 savings)
Though UOB likes to advertise that you get up to 3.33% p.a. from the account, that is not the case. The 3.33% interest rate only takes into effect on amount that are from $30,000 to $50,000. In other words, in order to get this 3.33%, you first have to accept the lower interest rates the account gives you on your first $30,000.
This step-up interest rate structure means that the effective interest rates that the UOB One Account gives differs depending on the balance in your savings account.
Who Should Apply:
Assuming you have $50,000, the UOB One account gives an effective interest rate of 2.42%. This is higher than the OCBC 360. In return, you only need to spend $500 on the UOB One card and either credit your salary or pay three bills online. This is less action required compared to the OCBC 360.
The catch here is that you MUST spend $500 on the UOB One Card for you to qualify for any bonus interest. Otherwise, you don’t get any interest even if you fulfil the other requirements.
BOC SmartSaver, Bank Of China
We once said the BOC SmartSaver had the best savings account in Singapore and got punk’d by them on the very same week when their criteria were changed. How do they now fare? Here are some of their perks.
- Crediting of salary (min: $2,000) – 0.8 % p.a. If salary credited is $6,000 or more, interest rate is 1.2% p.a.
- Credit card spend (min: $500) – 0.8% p.a. If credit card spend is $1,500 or more, interest rate is 1.6%
- Perform 3 bill payment, or BOC Mortgage repayment – 0.35%
Realistic Interest Rate: 1.95% is what most people can expect based on the usual criteria being met (e.g. crediting of salary, spending $500 on credit cards, online bill payments)
For higher earners (take home salary of $6,000 or more) who can spend at least $1,500 on their BOC credit cards, an interest rate of 3.15% is achievable.
Who Should Apply: If you are a young working adult starting at an average salary, the BOC SmartSaver will work out to be quite similar to the OCBC 360 (BOC: 1.95%, OCBC: 1.85%).
However if your takehome is $6,000 or more and you spend $1,500 per month on your credit card, then the BOC SmartSaver should be worth your consideration.
Our Analysis – Which Is Better For You?
The OCBC 360 is the easiest to understand and use. Just by crediting your monthly salary, you instantly enjoy 1.2% p.a. This is higher than both the BOC SmartSaver (0.8% if salary is between $2,000 and $6,000) and the UOB One account.
If you have $50,000 in your savings account and already intend to spend $500 on credit cards each month, the UOB One Account would be best. That’s because the UOB One Account will give you an effective interest rate of 2.42% if you spend at least $500 a month on your UOB One card and either credit your salary or pay three bills online.
If you are a high-income earner ($6,000 or more), and/or is someone who will spend at least $1,500 a month on your BOC credit cards, then the BOC SmartSaver will make the most sense. That’s because the BOC SmartSaver will give you 1.6% p.a. for credit card spend of at least $1,500 a month, and 0.8% or 1.2% for salary crediting.
Bonds and Fixed Income