This article is written by Jackie Tan and first appeared on fundMyLife, the platform that intelligently connects your insurance questions to the trusted financial advisers.
I wonder if those are CGI or real rabbits. (Source)
No doubt you’ve been seeing ads recently by DBS, involving a well-groomed man (presumably rich) who is surrounded with lots of bunnies. In the ad, he talks about the new DBS Multiplier Account where the more one transacts on the account, the more one multiplies his/her money. Besides the “aww” factor, the rabbits double as a metaphor for multiplication.
There are three value propositions in the advertisement for the account:
1) No minimum salary credit (hurray)
2) No minimum credit card spending (no way)
3) One can earn up to 3.5% (omg)
Of course, the last value proposition is seemingly the most impressive one and many blogs have extolled the benefits of the account. We here at fundMyLife are a curious bunch so we took a closer look at it and see what the fuzz is all about.
The Interest Table
The interest table shown on the website, with numbers added on the left side to number the various tiers. Figure adapted from DBS and modified for clarity.
With reference to the table above, we see six different tiers of interest rates, with two separate sets of interest rates depending on how many components of your money are transacted (thereon known as 1-cat and 2-cat for transactions involving 1 and 2 categories respectively).
fundMyLife Does the Maths
Obviously, the more you transact the higher the interest rate is. At the lowest, it’s 0.05% for both sets. However, as you transact higher amounts, the difference between 1-cat and 2-cat becomes more apparent. Obviously, the purpose is to encourage you to perform 2 or more categories of transactions with DBS.
An interest-ing (geddit?) point to note is that the jumps in rates are quite uneven. More specifically, the jumps between Tier 1 and Tier 2 and between Tier 5 and Tier 6 are very dramatic.
A chart that shows the increase in interest rates between one tier and the next tier. Black bars show the tiers in 1-cat and red bars show the tiers in 2-cat.
To illustrate this point, we calculate the difference in interest rates between tiers. Not surprisingly, the difference between the first two tiers is staggering – by transacting between $2,000 to $2,499/month (Tier 2), you enjoy 1.5 and 1.75% more interest rate for 1-cat and 2-cat respectively than if you had transacted $1,999/month and below (Tier 1).
As mentioned, the 3.50% is the last tier (Tier 6) and it is only when you transact a total of $30,000/month across 2 categories. It’s also a huge jump from Tier 5 for 2-cat, where it’s a 1.2% increase. On the other hand, if you transacted $30,000/month across only one category, i.e. 1-cat, the maximum interest rate you’d get is 2.08% and is only a 0.08% increase from the previous tier.
$30,000/month transaction to reach the 3.5%!
What if you transacted between $15,000 to $29,999/month with 3 categories (Tier 5)? You’d get 2.3%, which is only a 0.1% increase from the previous tier (Tier 4). The difference between tiers for both 1-cat and 2-cat seems to be very little in between.
A chart that illustrates the difference between 1-cat and 2-cat for each tier. As mentioned, there is no difference between the two sets in Tier-1.
We also looked at the difference in interest rates between 1-cat and 2-cat for each tier, and it is the largest for Tier 6. On the other hand, the consumer does not benefit too much from making the switch from 1-cat to 2-cat in most tiers.
Transaction Amount to Cross Tiers
We also observed something interesting as well in the table. If you haven’t noticed it yet, the range in the amount of transaction increases across tiers as well.
A chart that illustrates the transaction range for each tier. Tier 1 has no range because it has no minimum whereas Tier 6 is not shown because it has no maximum.
Simply put, the transaction gap increases as you move from the first tier to the last. It also means it’s relatively challenging to cross over to the next tier from your current tier.
Fur real? What does it mean?
Given the irregular distribution of interest rate increase, we think that it’s meant to capture two very specific demographics – the ones in the first two tiers and the ones in the last tier. One very good thing that we note is that there is no minimum amount required in the account which means students, fresh graduates, and young working professionals will benefit from a decent interest rate, i.e. 2% for 2-cat. The account also rewards consistency so those who with low risk appetites can benefit from this. Those who do not mind transacting everything under DBS, e.g., loans, credit cards, insurance, should give it a go as well.
The DBS Multiplier Account will also benefit big ballers who can afford to transact $30,000/month and yet still have enough savings in the account to reap the benefits of the increased interest rate.
That said, for someone who can afford to transact $30,000/month, we think that person can afford better financial instruments to grow his wealth anyways. 3.5% as a form of interest rate is nothing to scoff at…if one doesn’t mind committing all that money with one financial institution. Moreover, it’s for the first $50,000 in the account.
We don’t love it, but we don’t hate it either. Its low requirements and flexibility to combine different categories are refreshing additions to their competitors’ tiered interest rate type of savings accounts (we’re looking at you guys, OCBC 360).
1) No minimum amount in account
2) No minimum credit card spending
3) Flexible combinations
1) Interest rates apply only to the first $50,000 in the account
2) Challenging to reach the 3.50% interest rate as advertised
3) Once you’re stuck in one tier it’s challenging to move to the next one
Conclusion: You need to commit your money with DBS Multiplier Account to reap the most reasonably tiered benefit. Also, you’ll need to transact >$2000/month to obtain a meaningful interest rate.
That’s All Folks!
We hop this article helped you make an informed choice before leaping into signing up for the DBS Multiplier Account. If you want to know more about personal finance and would like to ask questions, head on over to our main site and ask away!
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