Unless you’ve been hiding under a rock, you would have heard by now that as of 1 May 2015, the bonus interest rates for the OCBC 360 Account are going to be lowered. Yes, it is now harder than before to earn interest on the account. SURPRISEEEEE!!
Since most of you would already have heard the news, here’s some food for thought to consider before running to the nearest OCBC branch to angrily cancel your account and rage quit the bank.
This change comes only a year after the OCBC 360 account was first introduced, offering a 3.05% interest rate. Is changing the interest rates after only a year a bit sudden on OCBC’s part? Yeah, maybe. Did they have every right to do it? Yes.
You sure you’re not getting paid by OCBC to say this?
No we are not getting paid to say this, we’re just calling it as it is.
Their OCBC 360 Account terms and conditions stated very clearly, “The decision of OCBC Bank on all matters relating to the 360 Account, and the matters set out in these terms and conditions shall be final and binding”. And, “OCBC Bank may at any time at its absolute discretion, without notice or assignment any reason therefore, delete, vary or supplement, any one or more of these conditions in such manner as OCBC shall think fit”.
We’re not lawyers, but it sure seems like this is what it means: When you put your signature on the Account application, you’re basically giving OCBC the right to do whatever they want with your money.
And this is not just something OCBC does. Any bank in their right mind will also include similar terms and conditions in all of their products. Because at the end of the day, banks are businesses. They do whatever it takes to make profits, so that their CEOs can earn a million dollars more than the previous year.
So first of all, read your Terms and Conditions.
Especially for even bigger ticket items like home or car loans. You can bet your last buck, that those contracts and agreements usually favor the banks position more than yours.
Well, then, is it time to switch to another bank?
Not just yet! First, let’s look at exactly what will change with the OCBC 360 account, come 1 May 2015.
1. Base interest is 0.05% no matter how much is in your account balance.
In the past, account balances of $200,000 or more would earn 3 times the regular base interest, or 0.15%. In May, this will be taken away. No matter how much is in your account balance, you will only earn a base interest of 0.05%. Considering you’ll still only get bonus interest on the first $50,000 of your account balance, there’s now no reason to put more than $50,000 in your account.
2. No change to Salary Bonus Interest.
The good news is, there’s no need to make any changes to your salary crediting account. As long as you’re earning at least $2,000 a month, you’ll still be eligible for the 1% bonus interest.
3. Payment Bonus Interest drops to 0.5% per year
If you thought it was too easy to be earning 1% interest a year just by paying 3 bills each month using OCBC Online Banking, you’d be right. While there’s no need to start making other bill payment arrangments just yet, be prepared to only earn half, or 0.5% bonus interest from May onwards.
4. Credit Card Spend Bonus Interest drops to 0.5% per year AND eligible criteria increases from $400 to $500 a month.
This is perhaps the toughest pill to swallow. Not only do you earn only half as much interest than before, you now have to spend $100 more each month in order to earn it.
But when you think about it, this generally shouldn’t be a problem. The OCBC FRANK card gives the best cash back for online transactions. The OCBC 365 card is one of the best cash back credit cards for petrol and dining. Chances are, you’re already spending $500 a month on these cards.
5. OCBC 360 has two new bonus interest categories.
Yes, the other bonus interest categories have lowered their rates, but OCBC has promised two new bonus interest categories to make up for it. While they’re going to wait till May to reveal what they are, we can probably guess that at least one of them will be about home loan instalments.
Following the example of the DBS Multiplier, we suspect OCBC will probably try to entice customers who are looking to refinance by offering bonus interest rates for the 360 Account to those who have an OCBC Home Loan.
So, while it has not been made clear what the two new bonus interest categories are, or how much extra interest they’ll earn you, what’s clear is this: you should still be able to earn at least 2.05% interest a year.
Okay, so now will you tell us if it’s time to switch to DBS Multiplier?
We previously did a head to head comparison of the OCBC 360 account and DBS’s Multiplier account, both of which function in loosely similar ways. This was of course based on OCBC’s original bonus interest of 3.05%, with OCBC coming out on top. So is it time to switch?
Well, at first glance, OCBC 360’s 2.05% is less than DBS Multiplier’s 2.08% per year. But don’t start withdrawing all your money from your OCBC account and switching to DBS just yet!
The DBS Multiplier programme requires you to have at least be transacting more than $7,500 a month with them before they give you an extra 1.03% interest on your account, on top of the base interest of 0.05%. To even come close to the maximum interest rate of 2.08% per year, we found out that you would need to be earning at least $12,500 a month!
Okay, let’s just put things in perspective…
For illustrative purposes, let’s meet Sarah. She keeps $10,000 in her bank account. Each month, she earns $2,500 and her credit card expenditure is $500. She also pays her utility, mobile and insurance bills monthly.
With the DBS Multiplier programme, Sarah’s total monthly transactions would be $3,000 (excluding the sum of her bills). Assuming her bills don’t add up to $4,500 in total, that’s less than the minimum of $7,500 needed to qualify for DBS Multiplier’s bonus interest. Her $10,000 in the bank would only earn 0.05% interest a year, or $5. JUST FIVE DOLLARS A YEAR.
Even with the changes to the OCBC 360 Account, Sarah would earn an extra 1% interest for her salary, an extra 0.5% for paying her bills, and a final 0.5% for spending at least $500 on her credit cards. Her $10,000 in the bank would earn at least 2.05% in interest a year, or $205. Before the change, she would have earned 3.05% in interest a year, or $305.
So yes, you will be earning significantly less interest with the OCBC 360 Account come 1 May 2015. That’s undeniable and inevitable. But the fact remains that, even with the announced changes, the OCBC 360 Account still remains one of the better savings account in the market today.
What do you think of the announced changes to the OCBC 360 Account? Do you regret applying for it? Share your thoughts with us.
Asian Development Bank