Or rather, should not.
OCBC announced changes to its bonus interest on the 360 Account last week. The tagline is that the “The OCBC 360 Account JUST GOT BETTER”, arising from the fact that you can now earn up to 3.25% from your first $60,000, up from 3.05% from the first $50,000 previously.
On paper, it does look like it “JUST GOT BETTER”. We look into the details to see if this is really the case.
What Are The Main Changes?
We won’t harp on how great the 360 Account used to be because we think it was a good deal and people would agree. Rather, we will discuss what the key changes are, and what they mean to existing 360 Account holders.
First $60,000 eligible for Bonus Interest
Here is the biggest change. Previously, account holders could only earn bonus interest on the first $50,000 in their accounts. Any amount beyond $50,000 earned the meagre interest given by banks (0.05%).
$50,000 is a sum we believe fits well into an emergency fund that most families would be comfortable setting aside. Being able to earn an interest in excess of 3% without having to commit additional liquidity away is a great bargain. And one that pushes people to want to save more.
With the bonus interest now eligible for the first $60,000, there is now further incentive for account holders to make an effort to save an additional $10,000 per account.
Assuming deposit of $60,000
|Previously||Interest Earned On First $50,000 (3.05%)||Interest Earned On Next $10,000(0.05%)||Total Annual Interest||Total Monthly Interest|
|Now||Interest Earned On First $50,000 (3.25%)||Interest Earned On Next $10,000(3.25%)||Annual Interest||Monthly Interest|
Account holders can earn up to $162.50 per month if they can fufill all the criteria and have $60,000 set aside in their bank account. That’s pretty attractive.
The Catch – OCBC Suite Of Products
The reason why OCBC pays such an attractive interest rate for people to keep money in its bank is because the interest is conditioned upon account holders fulfillfing certain condisions or using its other suite of products and services.
The bonus interest is created in such a way that it serves as a self-selecting mechanism targeted specifically to the demographic of customers that the bank is looking for. And this includes people with an income of at least $2500 per month.
|Bonus||Conditions||Gross Salary Requirement||Why OCBC wants it?|
|1.2% – For salary Giro into account||At least $2000 salary giro into OCBC 360 account.||$2500, $2000 after CPF requirement.||Gain better information about its customers|
|0.5%- For credit cards||Miniumum spending of $500 on OCBC credit cards||$2500 – to apply for credit card.||Boost its credit card usage|
|0.5% – For bills payment||Minimum of 3 bills payment per month||N.A||Ensure that customers use the 360 account as a primary account.|
The total interest for fulfilling the above three conditions is 2.2%.
And while just about anyone can open a 360 account, the conditions set by the banks help ensure that those who are most likely to do so are the ones with a minimum salary of $2500, and with a pretty sizeable 5 figure savings account that would allow them to gain the most out of the bonus interests.
Expanding Into Financial Products
To be eligible for the remaining 1%, 360 account holders will need to purchase an eligible financial product from OCBC of a certain minimum value.
Unlike the other bonus areas, purchasing a financial product is a long-term commitment that should not be affected by short-term gratifications. Some of the products include endowement plans, life insurance policies and bonds. Account holders will be entitled to an additional 1% for one year (only) if the person buys such an eligible product.
From OCBC’s perspective, this provides incentive for their existing account holders to buy products from them instead of similar products from other banks or insurance companies.
While it might be difficult to convince account holders to buy a product on the pretext of just the additonal interest, it might, at the very least, give them preferential consideration if account holders is on the lookout for a certain insurance of investment plan.
What an existing OCBC 360 account holder should do now?
What is worth doing now is to spend a little effort to increase your saving deposit at OCBC to max out the interest for the first $60,000. If you already have that money parked elsewhere in another bank, consider transferring it to your 360 account as it will earn superior interest rates.
We hope people are smart enough in terms of financial literacy not to foolishly buy an eligible financial product just to earn the additional 1% for one year. Even if there is a product out there which you are interested to buy, you should do proper comparison with other products offered by other institutions, and not let the extra 1% be the deciding factor.
Are you an existing OCBC 360 account holder? Share with us your thoughts on Facebook on how you feel about the latest changes and what you will be doing.