This article was updated on 8 May 2019 to reflect changes to the DBS Multiplier Account.
The DBS Multiplier account is a savings account that allows you to earn up to 3.8% interest rate per annum. The opening of a DBS Multiplier account can also be done online, saving you both a trip to the bank as well as the time spent waiting for your turn.
Here’s a quick overview of how the DBS Multiplier works:
A) Salary crediting
Optional transactions that contribute to a higher interest rate:
B) Credit Card Spend (using a DBS/POSB credit card)
C) Home Loan Instalments
Of course, all of these have to be done with DBS/POSB.
The interest rate you earn first requires your salary to be credited into a DBS/POSB account (this does not have to be the DBS Multiplier account). How much you earn in interest is calculated based on the number of transactions you make that month, as well as the total amount that was transacted.
How The Interest Rate Is Calculated
The DBS Multiplier Account rewards you with a higher interest rate for more transactions done with DBS/POSB. For example, crediting your salary and making transactions in 2 categories or more categories will get you more interest compared to crediting your salary and only carrying out 1 transaction.
However, the more transactions your make does not necessarily equate to a higher interest rate as making transactions in 3 different categories gets you the same interest rate as making transactions in 4 different categories – unless having more transactions add up significantly to bump you into the next tier under “Total eligible transactions per month”.
The interest rate is applied to the average daily balance in your DBS Multiplier account. This means that you should try to keep as much money as possible in your DBS Multiplier account to earn more in interest. Since this interest rate is applied to end-day balance, this also means that you should try your best to transfer your funds into your DBS Multiplier account as early as possible.
For example, if your salary is credited on the 25th of the month to another DBS/POSB account, you should transfer the funds into your DBS Multiplier account on the 25th rather than the last date of the month to ensure that the interest rate is applied to a higher balance now that your salary is included inside.
What I Like About It
#1 Targets Are Reasonable And Easy To Hit
Salary crediting: No effort needed on my end, since I just need my employer to credit my salary into any of my DBS/POSB accounts and it will be recognised for the salary crediting component under the code SAL/PAY, though cheques won’t count.
Credit card spend: Again, another low effort component as there is no minimum spend. This means I can just spend less than $2 for my morning coffee and this criteria will already be met.
This makes it extremely easy to hit the basic requirement of salary credit + transaction in 1 category. The interest rates are also attractive even if only one transaction was made. For most fresh graduates, this would probably translate into about 1.85% interest p.a.
#2 Encourages Investing
With the investments component as one of the criteria for bonus interest, it encourages young adults to begin investing. Even for young adults that have already begun investing, it makes you put more thought into your investments as not all investments will be considered under this category.
There are 3 ways to satisfy the investment transaction component:
1) Dividends from your CDP: Similar to your salary credited, the dividends does not need to directly go into your DBS Multiplier account for it to be recognised. This dividends can come from the stocks you are currently holding.
2) New purchases of unit trusts: Only purchases of unit trusts made after the opening of your DBS Multiplier account will count towards the investment component. Unit trusts that were purchased before creating your DBS Multiplier account will not count.
3) Buying of shares using your DBS Vickers account: When using DBS Vickers to hit your monthly investment transaction, only fully settled ‘BUY’ trades are recognised (i.e. ‘SELL’ trades are not recognised).
It offers 3 different ways for investors to meet the investment criteria. For many new investors, the first thing that can be done along with opening your DBS Multiplier account is to purchase a Unit Trust Regular Savings Plan or POSB Invest-Saver.
This requires as little as $100 per month to start your investment journey. Furthermore, you stand to benefit the next 12 months as your monthly contributions will be recognized under the investments transactions component.
For investors that have already purchased unit trusts, you can still meet the investments component during months where you receive dividends from your stocks or when you purchase shares using your DBS Vickers account.
#3 No Minimum Spend On Credit Card
Credit card spending component does not require a minimum spend. This means I don’t have the worry of having to spend more just to make sure I meet the credit card spend criteria.
This also allows me to use other credit cards outside of DBS/POSB. This is something that has become increasing important as there are many other credit cards to use, all with different perks.
#4 Recognises These Transactions Across Accounts
The transaction components of the DBS Multiplier do not require it to be done directly into/out of the DBS Multiplier account itself.
This means that my salary credited into another DBS/POSB savings account (that is not the DBS Multiplier) is still recognized as the salary credit component for my DBS Multiplier account. This saves the trouble of having to approach your HR to request for them to change the account your salary is currently credited into, to the DBS Multiplier account.
The same goes for the dividends that you receive from your stocks. There’s no need to change the account that CDP credits your dividends to as long as it is currently a DBS/POSB account.
#5 Easy And Clear Tracking
Bank & Earn Summary (Before 1 May 2019 updates)
Bank & Earn Summary (After 1 May 2019 updates)
The Bank & Earn Summary section gives you: 1) an immediate overview of the components you have hit for the month, 2) how much was transacted in that category as well as 3) the interest rate you will be getting. This makes it easy to keep track of how much you have transacted for the month as well as which interest band you fall under for that month.
At the end of the month, DBS also sends an SMS to let you know how much interest you have earned for that month as well as the interest rate that was applied. This is a nice touch as it ensures that you know how much interest you earned that month, especially when many transactions in your bank account are easily overlooked.
#6 Couples can work together to get higher interest rates
Besides having individual DBS Multiplier accounts, couples can create a joint account with DBS/POSB. By crediting both parties’ salaries into the joint account, this helps both you and your partner satisfy the salary crediting component of the DBS Multiplier even when only one party receives a salary that month.
It also potentially bumps both your interest rates into the next tier as both your salaries are combined and recognized as salary credited, allowing both of you to hit the next tier of the DBS Multiplier.
Limitations To The Multiplier Account
#1 Investments Component
For investors like myself that have already started a monthly investment plan prior to opening a DBS Multiplier account, unfortunately, the unit trust will not be recognized under the investment section. This is a pity because while you are doing some form of investing, it remains unrecognized by the bank unless you purchase a new unit trust.
Even for new purchases made after opening your DBS Multiplier account, the monthly contribution amount for the unit trust will be recognised only for the first 12 consecutive contributions. This means that after the first year, this monthly investment contribution amount will not count towards your investment transaction component.
However, the dividends you receive from the unit trust will always be recognized during the months that you receive the dividend.
#2 Bar to hit to get higher interest on the next $50,000 is very high (after your first $50,000)
Previously, higher interest rates were only applicable up to the first $50,000 in your DBS Multiplier Account, which meant that any amount more than $50,000 will be accorded with the prevailing interest rate of 0.05%.
As of 1 May 2019, the features of the Multiplier Account have been revised. You can now keep up to $100,000 in your account to get higher interest rates. However, the bar to hit to get higher interest rates for the next $50,000 in your account is very high. To qualify for higher interest rates on your next $50,000 you will need to credit your salary and transact in at least 3 categories.
This means that besides crediting your salary, spending on a DBS/POSB credit card and investing, you now have to either 1) take up a home loan with DBS or 2) purchase an insurance policy from DBS after opening a Multiplier Account. The monthly instalment for your home loan as well as the monthly insurance premium amount will be recognised under the respective transaction categories.
The Multiplier Account advertises the maximum interest rate of 3.80% per annum. However, in order to get this 3.80% p.a. interest rate, your total eligible transactions in the month has to total at least $30,000, a very large sum of money for most Singaporeans to be transacting every month.
Still The Best Account (For Now)?
While advertised as an account that that rewards interest rates of up to 3.80%, realistically, most people would end up getting something around 1.80% – 2.20% p.a, an extremely attractive interest rate. To put things into perspective, let’s say you have $50,000 in your DBS Multiplier account and earn 2% interest rate for all 12 months. This is close to $1,000 in annual interest earned!
It’s also great that it is user friendly, with transaction requirements being straightforward and relatively easy to hit. However, upon reaching the $50,000 mark, it is very likely that I will still turn to using another account while leaving the $50,000 inside the DBS Multiplier account, unless I have plans to take up a home loan with DBS or insure with DBS.
All in all, a great savings account for young working adults.