In a rising interest rate environment, it is not surprising to see some banks in Singapore beginning to reward savers with higher interest rates on their deposits. In the past month, UOB announced some changes to its popular UOB One Account. Headlining the change must surely be the eye-popping 3.88% p.a. savers can earn with the revised UOB One Savings Account as purported by the bank. This headline certainly got Heartland Boy’s attention and he spent a weekend morning to pore over the changes. Here is his review of the revised UOB One Savings Account and who are ultimately the winners and losers from this round of revision.
For those who are unfamiliar with how the UOB One Savings Account work, Heartland Boy recommends this article on his blog which explains the mechanism to maximise the interest rate of UOB One Savings Account.
Key Changes To The UOB One Savings Account
The UOB One Savings Account did indeed get bigger as advertised because an additional $25,000 can now earn bonus interest rates. Instead of the previous $50,000 cap, up to $75,000 in the UOB One Account can now earn bonus interest. This must surely spell good news for everyone and may even aspire another financial goal for the near term.
When terms such as “up to” are being used, it always deserves greater scrutiny. Instinctively, Heartland Boy reached out to the Terms and Conditions and got his calculator ready. Not surprisingly, a deeper analysis would reveal that only the last $15,000 tranche attracts an eye-popping 3.88% interest rate. If calculating effective interest rate is too troublesome for you, do not worry! Heartland Boy has compiled a table showing the maximum effective interest rate that the revised UOB One Savings Account provides.
Based on the corresponding deposits in your UOB One Savings Account, you will know in an instant the amount of interest rate that you will be getting on your entire deposit. Clearly, this table shows that it is not possible for all your deposits to earn 3.88% annually. That was purely a marketing gimmick to tug at your heartstrings.
Note that all the changes as explained would be effective from 1 August 2018.
The Winners Of The Revised UOB One Savings Account
- For those who have less than $30,000 in your UOB One Account, you will benefit as UOB has increased your effective interest rate.
- For those who have funds exceeding $50,000, you will be pleased to learn that an additional $25,000 can now earn bonus interest rate as well!
The Losers Of The Revised UOB One Savings Account
- If you have previously been maximizing your UOB One Savings Account by placing the maximum $50,000 that attract bonus interest, you need to know that come 1 Aug 2018, you will be in a worst-off position if you do nothing. Your effective interest rate drops from 2.43% to 2.03%. In absolute quantum wise, you will lose $201 in interest rate annually.
Therefore, users such as Heartland Boy who have wringed every single cent possible from the UOB One Savings Account needs to react by transferring in additional funds. This almost felt like a pseudo margin call.
How You Should Respond To This Margin Call
The following people in these situations should immediately transfer their monies and move up to $25,000 into their UOB One Account:
- If you are an existing OCBC 360 Account user and earning not more than 1.8% interest rate annually
- If you are an existing DBS Multiplier Account user and earning not more than 2.0% interest rate annually
- If any of your saving accounts are bursting at the seams, you should transfer all excess amounts that do not attract bonus interest rate into the revised UOB One Savings Account
Heartland Boy falls into one of these camps and have already instructed an online fund transfer to occur on 1 August 2018. It should work like clockwork and allow him to maximise his interest rate from Day 1.
The following people in these situations should not transfer their monies:
- If you are like Heartland Boy who has just planted a seed with the Citi MaxiGain Savings Account. Any withdrawal from the Citi MaxiGain Savings Account will cause your counter to drop and, depending on individual circumstances, the counter might even reset horribly to level 0.
- Transferring monies from any savings accounts that will cause you to fall below its respective minimum balance
- If your cash is already yielding more than 2.436%, then it does not make sense to move them into a lower-yielding product. What you should do is contact Heartland Boy and share your amazing secret.
All in all, you would notice that the maximum effective interest rate only increased by 0.006%. However, Heartland Boy thinks that such a minor tweak is sufficient to allow UOB to attract a deluge of funds come 1 August 2018.
Note that UOB is running a promotion whereby new account opened online between 16 July 2018 to 31 August 2018 would receive $100 cash. As is always the case with UOB, Heartland Boy recommends that you read the full terms and conditions. (they are limiting this to the first 53,000 customers!)