Following the rather controversial launch of the KrisFlyer UOB Savings Account back in April 2017, UOB has announced a brand new UOB Stash Account (essentially a savings account) which offers the opportunity to earn up to 1% p.a. interest. Account holders will essentially earn 0.05% p.a. interest on the whole account balance with the opportunity to earn a bonus interest (of up to 0.95% p.a.) if the Monthly Average Balance (MAB) is equal to or higher than the previous month.
UOB has done a fairly good job at explaining how the UOB Stash Account works - you essentially earn a base interest of 0.05% for the entire account balance and you will be able to earn up to 0.95% p.a. bonus interest for account balances between S$50,000 to S$100,00. In this article, I will show you why an account balance greater than S$100,000 make zero sense but more importantly, the Effective Annual Interest Rate (EAR) that you can get out of this account is only 0.825% p.a. (and not the advertised 1% p.a.).
As you can see in the table above, the bonus interest is only applicable to anything in excess of S$10,000 but under S$100,000 - outside of these boundaries, you will only enjoy a base interest of 0.05%. For the sake of simplicity and illustration, assume a scenario where a customer goes ahead and open a UOB Stash Account with S$20,000 - he then maintains this sum constant (therefore maintaining the MAB) over the whole of next year. This is how the interest breakdown would look like after a year:
- First S$10,000 at 0.05% = S$5
- Next S$10,000 at 0.80% = S$80
- Total Annual Interest = S$85 (EAR = 0.425%)
Effective Annual Rate (%) on UOB Stash Account
What I have done is basically plot what the EAR is at S$10,000 intervals - the EAR peaks at 0.825% when your balance is at S$100,000 and then falls significantly with every additional dollar that you have above S$100,000. Don't get me wrong though - the absolute amount of interest (in SGD) is definitely going to be higher when you have a great account balance (i.e. an account with S$200k is going to make more interest than an account with S$100k) but the EAR decreases as the account balance increases after S$100,000 which therefore makes the sweet spot at S$100,000.
With that being said, is it worthwhile to essentially park S$100,000 of your money with the UOB Stash Account for S$825 interest? If you have it lying in a miserable account somewhere that pays you only 0.05% p.a. interest, this is definitely a step up from that. However, you are much better off with accounts like the OCBC 360 Account or the Standard Chartered Bonus Saver Account which offers a much more lucrative rate. Besides, why would you stash your money (pun intended) with UOB when the CIMB FastSaver offers you 1.0% p.a. interest on your very first dollar (up to S$50,000)?