Gone are the days in Singapore where your savings accounts only attract a 0.05% p.a. interest rate. While I have always advocated the use of OCBC 360 for a young working adult, the newly-enhanced DBS Multiplier Account looks comparatively attractive now that I have greater expenses and commitments. The bonus interests applicable to the DBS Multiplier Account is capped at S$100,000 (S$30,000 more than the OCBC 360) but more importantly, it rewards you based on the total value of eligible transactions each month.
Now, the DBS Multiplier Account is relatively more complicated in terms of the way interest rates are calculated each month but this should not put you off - there is a great calculator for the Multiplier Account available online for you to estimate your annual interest payment. Similar to other types of savings accounts, you will be required to credit your monthly salary in order for you to take advantage of the bonus interest rates that you can accrue - therefore, you technically can't (unless you are moonlighting) benefit from both the OCBC 360 and the DBS Multiplier Account (you have to pick one!).
There are two main determinants on the way the bonus interest rates on the DBS Multiplier Account are calculated - the number of categories you have transacted in and the total eligible transactions per month. As mentioned earlier, you will have to credit your monthly salary into your DBS Multiplier Account - there is no required minimum but your total eligible transaction amount needs to be at least S$2,000 (e.g. S$1,000 salary + S$1,000 credit card spend) each month. Do not get too excited yet because if you are simply crediting your salary, you are only looking at a 0.05% p.a. interest rate.
Now let us move on to the more important bit - the bonus categories that will trigger bonus interest rates of up to 3.80% p.a.! DBS has already put together a really good summary in a table (as you would expect) on the exact interest rate you will get based on the number of transacted categories and the total eligible transactions for that month. However, I would just like to highlight a number of things if you are fairly new to bank jargons and these kinds of saving accounts.
1. The Second S$50,000 in your DBS Multiplier Account Will Earn More Interest
Similar to the way bonus interest is structured in OCBC 360, the second half of your S$100,000 will earn more interest than the first. Referring to the table above, you can see that the first S$50,000 of your account balance will attract a maximum of 3.50% p.a. interest while the next S$50,000 will attract up to 3.80% p.a. interest. Keeping this in mind, it is extremely important for you to estimate the total accruable interest before making a decision to switch (if you are on a different savings account)
2. CPF Component in Home Loan Instalment counts towards Total Eligible Transaction each month
If home ownership is something that you are interested in or if you have recently committed to buying a place, It is worth noting that the CPF component in your home loan instalment with DBS counts towards to the ‘Total Eligible Transaction’ value each month - don’t let that go to waste! While most of us will have no issues triggering the credit card spend category (otherwise, you probably should not be looking at this savings account), hitting the other three may be a little bit of a challenge. Fortunately (or unfortunately rather) for me, I have a home mortgage with DBS so I really need to activate another category to trigger the higher bonus tier.
3. You Might Be Better off with an Insurance/Investment Plan
In order to unlock the full potential of the DBS Multiplier Account, you will have to transact in at least 3 out of 4 categories each month. I would imagine most consumers would fall into the S$5,000 to S$15,000 bracket so I am going to use that as an example to show you how you can potentially unlock more interest by putting the minimum amount in either Insurance/Investment.
Assuming a balance of S$100,000:
Two Categories: S$1,127.85 (approximately S$93.99 a month)
Three Categories: S$2,299.50 (approximately S$191.63 a month - $97.64 more each month!)
Therefore, you should definitely consider this if you can secure an insurance or investment plan that requires less than S$97.64 each month. At the end of the day, there really isn't a 'best savings account' out there since it ultimately depends on your total income and expenses.