Since May 2015, OCBC has revised the interest rate of its popular OCBC 360 savings account thrice.
The latest revision, which takes into effect on 1 November 2018, will allow account holders to earn more interest provided they meet the revised criteria that has been set. However, the natural question on existing account holders mind is, will I be earning more or less interest?
The answer to this question depends very much on how much you currently have in your account
Previously, to earn bonus interest, account holders have to fulfil the following criteria.
Before 1 November 2018: Assuming Account Holder Has $70,000 In Savings
|Monthly Activities||Bonus Interest||Annual Interest Earned|
|Crediting Of Salary||1.2%||$840|
|Payment Of Three Online Bill||0.3%||$210|
|Minimum Spend Of $500 On OCBC Credit Cards||0.3%||$210|
|Total (inclusive of base interest)||1.85%||$1,295|
There were also two additional criteria that allowed you to earn bonus interest on your account.
Wealth– Insure or invest with OCBC. Earn 0.6% or 1.2% for 12 months, depending on the qualifying amount.
(In our opinion, we don’t think it makes any sense to buy a new product just to earn bonus interest on your savings for 12 months. However, if you already intend to buy a product, sure, enjoy the bonus interest. However, this should be an afterthought rather than a key comparison feature)
Save– Earn this 1% extra bonus on the first S$70,000 if your account balance is S$200,000 and above.
(The problem is that in order to earn an extra 1% bonus interest on our first $70,000, we first need an account balance of $200,000. This also means that while we enjoy a higher interest on our first $70,000, it is also offset by the lower interest we receive for the remaining $130,000, thus reducing the overall effective interest rate)
1 November 2018 Onwards: Assuming Account Holder Has $70,000 In Savings
* To qualify for ‘Step-Up’ bonus interest, account holders must increase their account balance by at least $500 compared to the previous month
If you are confused, you can refer to the table below from OCBC.
There are a few things worth noting.
Firstly, the highest effective interest rate that an individual can earn is 3.2% p.a. However, this is only achievable if three separate conditions are simultaneously met.
1) Account holders must have $70,000 in their savings. For all other figures, effective interest rate will be lower. This is because there is a different tier of bonus interest given for your first $35,000, and a higher tier of interest given on your next $35,000.
2) You need to invest or insure with OCBC over the past 12 monthsin order to earn the bonus interest from ‘Wealth’
3) ‘Step-up’ interest is a little tricky to calculate from a theoretical standpoint.This is because in order to earn the interest, you will need to increase your account balance by $500 compared to the previous month. However, if we assume that an account holder starts off with $70,000 (the optimal amount) in his/her account, adding $500 more each month will allow the individual to earn the ‘Step-up’ interest. However, the additional amount in the person’s account (above $70,000 now) will not earn bonus interest and hence the overall effective interest rate will be lower.
Then & Now – Ignoring Bonus Interest For ‘Wealth’ & ‘Step-up’
For a more realistic comparison, let’s ignore the bonus interest from ‘Wealth’ and ‘Step-up’. In other words, we are assuming that an account holder doesn’t buy an OCBC related product over the past 12 months, and isn’t actively looking to increase his/her savings by $500 more each month.
Assuming Account Holder Has $70,000
|Base Interest||$35 (0.05%)||$35 (0.05%)|
|Crediting Of Salary||$840 (1.2%)||$945 (1.35%)|
|Payment Of Three Online Bill||$210 (0.3%)||$0|
|Minimum Spend Of $500 On OCBC Credit Cards||$210 (0.3%)||$315 (0.45%)|
|Total (inclusive of base interest)||$1,295 (1.85%)||$1,295 (1.85%)|
Guess what, the numbers works out to be exactly the same!
Previously, account holders will earn 1.85% per annum if they 1) credit their salary, 2) pay three bills online and 3) spend a minimum of $500 on their OCBC credit cards. This applies regardless of the amount they have in the account.
Moving forward, account holders can earn the same 1.85% by 1) crediting their monthly salary and 2) spending a minimum of $500 on their OCBC credit cards.
They no longer need to pay three bills online. However, in order to earn the same 1.85% p.a, they now need to have $70,000 in savings. Otherwise, their effective interest rate will be lower.
Let’s run through another scenario, where an account holder has $35,000 in their OCBC 360 account.
Assuming Account Holder Has $35,000
|Base Interest||$17.50 (0.05%)||$17.50 (0.05%)|
|Crediting Of Salary||$420(1.2%)||$420 (1.2%)|
|Payment Of Three Online Bill||$105 (0.3%)||$0|
|Minimum Spend Of $500 On OCBC Credit Cards||$105 (0.3%)||$105 (0.3%)|
|Total (inclusive of base interest)||$647.50 (1.85%)||$542.50 (1.55%)|
Effective interest rate is now lower at 1.55% p.a. That’s because we no longer enjoy an additional 0.3% for paying three online bills through our OCBC 360 account. At the same time, account holders who have $35,000 do not receive the higher tier interest which is given on the next $35,000.
To sum it up, whether you are going to earn higher or lower interest very much depends 1) on how much you have in your savings account and 2) whether or not you are likely to increase your savings by $500 more each month, and/or will be investing or buying an insurance policy through OCBC.
We hope this article helps you in making the best decision on whether the OCBC 360 account makes sense for you to use.
If you are looking for the best savings account in 2018, you can read our guide to the best savings account for working adult in 2018.
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