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Sunday, July 20, 2014

I have blogged about the importance of having a war chest or a few (i.e. money in the bank, SRS, CPF-OA and CPF-SA). I also blogged about how I have a preference to put most of my money in the bank in fixed deposits for higher interest income.

Of course with fixed deposits, there is a lock up period but if we should need the money, breaking a fixed deposit simply means forfeiting the higher interest income and nothing else. So, try to have several fixed deposits instead of putting all our money in a single fixed deposit and try to go for shorter lock up periods.

We want to keep a good percentage of our money in the bank liquid enough to react quickly to opportunities. Unfortunately, with interest rates in local savings accounts around 0.05% to 0.1% per annum, we have to pay a pretty steep price for having liquidity. As I have a relationship with UOB, I am paid 0.2% interest per annum for money in my savings account. Yah. Big, fat, hairy deal, right?

Although some have told me about other banks like OCBC offering up to 3.05% per annum in interest on savings (up to a maximum of $50,000 deposited in the OCBC 360 account), I have been slow to act because of the various conditions which look complicated to me and I am a simple (or, some might say, lazy) person. Conditions? Must go online to make 3 bill payments a month and must charge $400 worth of purchases to a credit card issued by OCBC per month, for examples.

Taken from OCBC's ad.
3.05%? Sounds good, doesn't it?

Well, to be fair, why shouldn't OCBC have conditions which have to be fulfilled if they are paying us so much more? Even if we met only 2 out of the 3 conditions, it would mean getting 2.05% interest per annum and for $50,000, that would be a nice $1,025 a year in interest income. Good enough for a short holiday. OK, lazy, er, I mean simple AK, put this is on your "to do" list.

Also, recently, I opened a savings account with CIMB because they are offering 0.5% per annum in interest and 0.8% per annum if I were to deposit $500 in the account every month. No minimum spending required. No payment online required.

To save me the trouble of depositing $500 each month, I could even give them a lump sum upfront which I did and they would treat it as monthly deposits in advance. I get an ATM card and a free cheque book too. I am still very old school and believe that a cheque book represents convenience.

Like OCBC, there is a cap on which the higher interest rate would apply. In OCBC's case, it is $50,000. In CIMB's case, it is $750,000. Wow! I don't have that much liquidity. So, it doesn't matter to me but I know where I should be squirrelling my excess liquidity now.

An interest rate of 0.8% per annum is 4x more than what UOB is paying me. Sheesh. Why should I not consider parking more money in CIMB from now on (after parking $50,000 in OCBC 360, that is)? OK, need to visit OCBC soon.

If you should be interested, here are the links:
CIMB Star Saver Account
OCBC 360 Account

In case you are wondering, this is not an advertorial. Just talking to myself, as usual.

Related posts:
1. A foreign chest for emergency funds.
2. A special chest for emergency funds.
3. Why fixed deposits over structured deposits?
4. $350,000 gets peanuts? Upsize the peanuts!
5. If we want peace, be prepared for war!


Anonymous said...

Hi AK,

That is is pretty sweet rate. I asked many banks and none could match the no-lock-in at 0.8% rate.

BTW, do you know that if you had started your banking relationship with them when they were still new in SG and offering 0.9%, they still honor that rate for them as of now but only for the "pioneers" haha... I missed that as well as I was also dragging my feet...


AK71 said...

Hi Tree,

Yes, I was told. 0.9%. Nice!

Oh, well. 0.8% isn't too bad. In fact, it is a big improvement over the 0.05% and 0.2% I have been getting from POSB and UOB in recent years. -.-"

OT83 said...

Hi ak,

Sdis cover up to $50k only. For malaysia bank, should we be daring to put in more than $50k?


AK71 said...

Hi OT83,

I know what you mean. Then, what about ANZ, ABN-AMRO, SCB, HSBC and BOC, for examples? Hmmm...

I took a leap of faith when I started this savings account with CIMB. LOL. Well, they could be merging with RHB and they would become bigger than Maybank then. Another leap of faith, perhaps?

Unknown said...

Hi AK,

Won't using a money market instrument be better solution than a fixed deposit?

No lock-in period, give better than current account interest rate.

pf said...

If u r risk adverse, just stick to 50k. That's MAS depositor insurance. :)

AK71 said...

Hi Thomas,

Would you be referring to Treasury Bills issued by the Singapore government in this instance? This is an alternative that currently pays an interest of 0.34% per annum. It definitely beats 0.05% paid by POSB on our savings by a large margin. :)

I would say that although Treasury Bills are safe and our capital is intact if we were to hold them for the full 1 year tenure, in the event that we might have to liquidate before the 1 year period is up, there is no guarantee that we might not lose some money.

Since the only way to guarantee that I would not lose money in Treasury Bills is to stay with them till maturity, if I were able to get 1% per annum or more from a fixed deposit for the same tenure, I would go with the fixed deposit. :)

Money market instruments are probably for more sophisticated investors. I am a frog in a well. ;p

AK71 said...

Hi pf,

I am going to take a bit more risk then. I am thinking of pushing my deposit in CIMB to $100K for $800 in interest income a year.

The thought of getting a miserable $50 a year in interest income from POSB for the same amount in deposit now irks me.

Strange. It didn't bother me before. Is ignorance bliss? -.-"

Cory said...

I believe if you put on longer term FD and if withdraw prematurely you will still get compensated for the period deposited less some costs. How the amount looks like i do not have information.

AK71 said...

Hi Cory,

It could be the case. I know Maybank would pro rate to some degree, for example.

Oh, well. I just prepare myself for the worst case scenario. If I get more than expected, I am happy. ;p

pf said...

Perhaps, AK71. Now that I hv my flat downpayment money in ocbc 360, feel so happy. Think interest amt for 1 month is more than what I got for last 10yrs.

The required 3 bill pmt is not hard to hit. I paid my 2 dbs credit cards and 1 ocbc credit card bill via Internet banking from ocbc. Although half of my bills are giro from my posb account.

$400 credit card spending also not difficult as I am a card person. I can't stand to q up to get cash from atm.

Cimb is good. More interest. Gives me chq for my occasional requirement for free. :)

Vincent said...

Something in my mind tells me that the days of 0.8% interest in CIMB Starz Saver account may be ending soon.

The reason why CIMB offers such above market rate is because they are very new to Singapore banking scene and has only 1 branch here (or maybe 2 if you consider their Orchard Premier Banking Branch). Some people may be a bit wary of this and stay away from CIMB. The higher interest is to compensate their customer for the "inconvenience".

They are currently negotiating a merger with RHB Bank Bhd (& M'sian Building Society). If it is successful, they will become the largest bank in Malaysia surpassing Maybank. In Singapore, they will have a further 7 branches from the RHB franchise here. With a larger foothold, they are more likely to end their interest rate promotion to be in line with the other big boys here.

However as a CIMB Starz Saver account too, I am hopeful that my mind is telling me the wrong thing.

AK71 said...

Hi pf,

I am happy that I have taken the recent steps to help improve returns on my most liquid of assets.

I have a feeling that the market is overdue for a significant correction but will it happen and if it does happen, when? While waiting, improving returns on our cash on hand makes sense.

Just hope that the higher interest rates for OCBC 360 and CIMB last longer than not. :)

AK71 said...

Hi Vincent,

I am a frog in a well and wary of Malaysian banks too although I will admit that it is probably partly an irrational fear of all things Malaysian.

After rejigging my savings accounts with OCBC 360 and CIMB recently, I hope the attractive interest rates will stay for a long while more.

With interest rates likely to rise sometime next year, hopefully, we would see more competitive rates on savings too. Yah, no harm being hopeful. ;p

pf said...

I realized ppl r not too keen on internet banking.

With FAST, I trf my money out of cimb to my ocbc bank account with atm access in 5mins. Doesn't matter that cimb bank branches not convenient. If I'm outside, I hv ocbc and dbs on mobile.

I have that starsaver account for 2 yrs and I hv been at the branch only twice.

AK71 said...

Hi pf,

I am an old dog (or pig if we go by the Chinese zodiac) and, sometimes, I try to learn new tricks too. FAST is an easy trick to learn! I like it although I wonder if it will stay a free service or if they will start charging sometime in the future. -.-"

pf said...

Interbank trf has been free for years. It takes abt 2 working days like clearing a cheque. Now it became immediate. Think there is no reason to charge. :)

SCG8866T said...

Yo AK7, how are you?

Have you divested all your stock position? Waiting for the crash? STI does look toppish..

AK71 said...

Hi pf,

I hope it stays free too although there has been some speculation that FAST might charge a small fee in future. -.-"

AK71 said...

Hi Hayden,

I invest mostly for income and I try to do so with a margin of safety. Unless underlying fundamentals have taken a turn for the worse, I will stay invested but with a war chest ready. :)

Art Collector in SG said...

Hi AK,

What % of cash would you recommend in the portfolio this year?


AK71 said...

Hi Tony,

Generally, I do not think that stocks look terribly cheap. So, in the absence of really good deals which will give me good margins of safety, I will refrain from adding to my long positions.

So, I will want a bigger percentage of my portfolio in cash. What is the specific percentage? That, I won't say. There isn't a magic number, really. I believe that as long as I up the proportion of cash in my portfolio, I would feel happier. ;)

Anonymous said...

Hehe Yup! I hope you did open these two accounts because, why say no to free money?

I initially had a lot of inertia switching banks but my bf forced me into it. I'm glad I made the change.

AK71 said...

Hi capri,

Inertia! That's the word!

Yes, I have both OCBC 360 and CIMB Star Saver accounts now. :)

However, I won't say the higher interest income is free money. Free money is money we get from Lady Luck, when we have not done anything in exchange for it. ;p

AK71 said...

NTUC Plus card gets link points... $1,500 spent = 3,000 pts gets $20 NTUC Fairprice vouchers. That is 1.33% rebate.

NTUC Shareholders get 4% to 5% rebate annually but NTUC will take away some for the SLF and Lifestyle magazine. So, it might work out to be lesser. Depends on how much we spend at Fairprice supermarkets.

OCBC Frank VISA Card has an auto top up function if used as a NETS Flashpay card. Each top up will get 6% rebate if monthly spend on card is $500 or more.

Use NETS Flashpay to pay for all purchases at NTUC Fairprice, OCK, McDonald's and other places that accept that mode of payment. Indirectly, will be getting 6% rebate on purchases.

Jes said...

Hi Ak,

I like the OCBC 360 idea so much.. I blogged about it..

Anyway, thank you so much for all your sharing/murmuring to yourself!

AK71 said...

Hi Jes,

You are welcome. :)

I took a look at your blog just now and I have added it to my "RESOURCES" list in the left sidebar. ;)

If you would like to guest blog for ASSI on any topic to do with travelling, investing or cooking (or in some combination), give me a shout. You are a good writer. :)

Jes said...

Hi AK,

Omg omg omg! You really have no idea what your words do to me! I was really literally jumping for joy with your compliments, thank you so much! You are really a idol status to some of us even though you don't believe it!

Thanks for the boost in confidence, it will be an honour to be on your blog but I will need to strategize carefully :)

AK71 said...

Hi Jes,

Haha... I am happy that you are happy although I am sure you know what I will say about the idol status I supposedly have. -.-"

Anyway, no pressure about being a guest blogger. Take your time to think about it. When you have a guest blog ready, just send it to me like an email (not as an attachment) and I will copy and paste in my blog. I will edit, if necessary, of course.

Have a good weekend, in the meantime. :)

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