At the start of 2020, DBS announced upcoming changes to their popular DBS Multiplier Account, which will take effect from 1 February 2020. Right away, fans of the DBS Multiplier Account expressed their disappointment.
Before these changes take place, and to help you decide if you need to switch to another bank’s high-interest savings account, here’s an examination of what the changes are, and who gains or loses out.
Changes To DBS Multiplier Account From 1 February 2020
Essentially, there are two changes, which we will look at one-by-one.
Change #1: Salary Credit will be replaced by the Income category
This new Income category can be fulfilled by either
Salary Credit (via GIRO with reference codes of ‘SAL’ or ‘PAY’)
Investment Dividends received (via GIRO from Central Depository [CDP])
It also follows that investment dividends received would no longer count for fulfilling the Investments category.
Change #2: Interest for fulfilling the Income criteria + Transactions in 1 Category will only be applied to balances up to $25,000
This is how interest is awarded before 1 February 2020:
As you can see, so long as you fulfil the Salary Credit (soon-to-be replaced by Income) and make transactions in 1 other recognised category (such as Credit Card Spend, Home Loan Instalments, Insurance, or Investments), you will earn higher interest on your first $50,000 inside your DBS Multiplier Account.
Unfortunately, this will be reduced to the first $25,000. Those who wish to earn higher interest on their first $50,000 would now need to fulfil transactions from 2 categories.
Now that we understand how the new mechanics work, let’s take a look at the winners who would benefit from the changes – and who would lose out, compared to the past.
Winners: People Who Don’t Draw A Monthly Salary
In the past, the DBS Multiplier Account doesn’t make a lot of sense for those who don’t earn a regular monthly salary, such as freelancers, self-employed individuals, or retirees.
By broadening the mandatory base category from merely Salary Credit to Income, which encompasses Salary Credit and investments dividends, more people can fulfil the basic criteria and enjoy higher interest from their DBS Multiplier Account.
One way to reliably fulfil the Income criteria each month is to utilise the popular method of building a “Singapore Savings Bonds (SSB) Ladder”, where users buy SSB for 6 consecutive months so they can receive dividends all year round (since SSBs make coupon payments every 6 months).
Obviously, unless your investment dividends are huge, you would need your other categories to help ensure the total amount of eligible transactions surpasses $2,000 – otherwise you’ll only be earning 0.05% in interest, no matter how many categories you manage to fulfil.
Winners: People Who Don’t Receive Their Salary Via GIRO
In some companies, salaried employees don’t receive their salary via GIRO. Instead, they may receive a physical cheque, get a bank transfer via FAST, or even newer payment methods like PayLah! or PayNow.
Just like those who don’t draw a monthly salary, this group of users can now use the DBS Multiplier Account to earn attractive interest.
Winners: People Who Want To Utilise High-Interest Savings Accounts From Other Banks
Salary crediting is an common action among high-interest savings accounts that helps you earn bonus interest. For example, the OCBC 360 account awards you with between 1.2% to 2% just for receiving a monthly salary credit.
By expanding the basic criteria from Salary Credit to Income, DBS has opened the doors to allow enterprising users to explore how they can maximise their interest earned by utilising additional high-interest savings accounts from other banks.
Losers: People Who Built SSB Ladders To Fulfil The Investments Category
In the past, the aforementioned “SSB Ladder” was used to fulfil the Investments criteria. For those who patiently did so and are receiving monthly Salary Credit, their “SSB Ladder” will not be helping them clock Investments category.
To fulfil the Investments category, users would now need to either:
Buy a Unit Trust via DBS/POSB; or
Set-up a Regular Savings Plan via Invest-Saver; or
Make fully settled online “BUY” equity trades via DBS Vickers.
It should go without saying that before making any investments, you should carefully consider your own risk appetite and what your investment objectives and time horizon are. If you really wish to invest for the sake of fulfilling DBS Multiplier Account’s Investments category, then you might want to pick something with lower volatility, such as a fixed income fund.
Losers: People With More Than $25,000 In Balances And Only Fulfil 1 Category
In the past, user of the DBS Multiplier Account can enjoy the high interest on their first $50,000 just by fulfilling the Salary Credit criteria and transactions in 1 other category. The reduction of this to the first $25,000 means that this group of users would lose out.
In order to enjoy the same interest as before, they would now need to fulfil transactions in 1 more category. If they already have DBS/POSB Credit Card Spend, then the next low-hanging fruit for most people (who don’t plan to take a home loan with DBS or buy insurance from DBS’ bancassurance partners) would be Investments.
Calculate For Yourself To See If You’re A Winner Or Loser
While some users may bemoan DBS adjusting how the DBS Multiplier Account works, the changes are not all for the worse. With some careful planning, you could still receive similar (if not the same) interest you’re used to.
In addition, new users can now come on board the DBS Multiplier Account family, while existing users can now explore the possibility of using multiple high-interest savings accounts.
It is not uncommon for banks to revise their terms and conditions. DBS is neither the first bank to do so, and this change is likely not going to be the last. As customers, if we evaluate new changes and find that it still makes sense for us, even if it is slightly less attractive than before, then we’re still winners.