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Do this to get higher interest income with UOB ONE?

Saturday, July 29, 2017


Understand that you have UOB One Card.

Recently, a UOB Personal Banker approaches me regarding the other usage of One Card to earn higher interest in the One Account.

Instead of spending $500, one can just save that $500 through a Prudential savings plan. This $500 will be deducted from the One Card every month for 5 years. After which, the total amount deducted will be locked for another 10 years. 

At the end of the 15 years, one can earn an effective interest p.a. of about 3.13%. The principal is guaranteed. 

In this way, one does not need to force spend every month to reach the $500 target in order to earn a higher interest on the One Account. Through this method, one can also earn higher interest as this $500 is "spent" on the savings plan, by utilizing the One Card.

What do you think of this? Appreciate if you can talk to yourself...

I will avoid an insurance cum savings (which is really insurance cum investment) product. I always say buy term and invest the rest. Instinctively, I would say 'no' to this offer.

I believe that 3.13% per annum is the potential interest rate and not guaranteed. I do not know if you would be disappointed 15 years later if you only get back your capital then (if Prudential does not go bust).

If you have trouble spending $500 on your UOB ONE Card each month, it might be better to simply forgo the UOB ONE Account. Forget it.

Doing this, you would be forgoing an additional interest income of about $800 a year (assuming you have $50,000 in the savings account which would have earned a bonus 1.6% in interest with a monthly spend of $500) but it gives you greater financial flexibility and a chance to build a bigger war chest for the next bear market.

Related posts:
1. UOB ONE Account?
2. How many $29,000 do we have?


Spur said...

Aiyoh, not another endowment product being peddled by salesmen (and women) as "savings". For 15 years plan, you'll be lucky to get 2.5% IRR yield --- forget about the 3.13%. Pru is also well known to be a high expenses company. Good for their salesmen, not so for customers. Just check their total effect of deductions in their benefit illustration to confirm.

Frankly we're gonna get a big discount in the markets within the next 5 years. You can do much better by saving $500 monthly into your war chest, and then deploying it when markets go to hell.

Moreover, I'm not sure how "sticky" the relationship is between the One card & the Pru endowment .... must you hold onto the One Card throughout at least the initial 5-year payment period? Any repercussions or penalties if you were to cancel your One card? Otherwise UOB can stick you with "compulsory" annual card fees etc.

AK71 said...

Hi Spur,

And to waive the annual fee on the UOB ONE card, a monthly spending of $1,000 is required, apparently. Alamak. -.-"

Laurence said...

Opting for the Prudential Savings Plan is akin to inviting Prudential to spend your monthly $500 for you. And not forgetting the huge bonus you're awarding your "helpful" UOB Personal Banker on behalf of UOB. Lol.

As AK always says: "Nobody cares more about our money than we do. Don't ask barbers if we need a haircut."

Kevin said...

Hi AK,

I think it is more of helping UOB to get higher interest income, fee and commission income and in return they were able to attain a rise in net profit by 5.5% in Q2. ;P

I am sure the principal is guaranteed only after paying a high expense ratio which will erode the interest earned. It is more worthwhile investing in UOB stock instead to get a close to 3% yield at current share price. ;)

AK71 said...

Hi Laurence,

You don't mince your words, I see. ;p

I am sure that many readers appreciate your message. ;)

AK71 said...

Hi Kevin,

You say invest in UOB one hor. Not me. ;p

Maybe, I should look at becoming a UOB shareholder.

Aiyah, then, I shouldn't have published this blog. -.-"

Kevin said...

Hi AK,

If you like 3-in-1 coffee then Haw Par is more value for money as it contains substantial holdings of UOB UIC and UOL for a much cheaper price. ;)

The healthcare and leisure segment of the business is just a disguise only. :P

AK71 said...

Hi Kevin,

Unfortunately, I missed the Haw Par boat. :(

Tiger Balm by Haw Par.

Will just have to wait patiently to see if it comes back. :)

Kevin said...

Hi AK,

You can also say UOB or any other stock lor but just put disclaimer "stocks mentioned are purely based on education/discussion purposes and not picks/recommendation purposes." :P

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