I received an SMS from OCBC about the new updates to the OCBC 360 account and after a couple of clicks, I was greeted with this:
Basically, OCBC 360 has regressed from an amazing product three years ago to a good product two years ago and is now just an ok product at best. This is reflected by the many (somewhat vitriolic) blog posts about this change during the past 24 hours.
Although I am definitely disappointed by the reduction in the interest rates for the payment and spend part, here’s why I am taking quite a different position from most other financial bloggers and remaining on OCBC 360.
If you are an OCBC shareholder, you should laud what the management is doing. Paying less interest on existing deposits.
Obviously, some people will switch their funds around in search of the highest interest rates. But I believe most will stay put since it is quite a hassle for most to email the HR to change their salary crediting, adjust their GIRO payments that is attached to an OCBC credit card and subscribe for new credit cards from other banks.
Well, that is what we would have to do if we wanted to switch from the package of OCBC 360 & the OCBC 365 card to UOB One or the BOC SmartSaver bundles. Not to mention, we are using iOCBC as our brokerage.
If I were to make a switch, it would be to the BOC SmartSaver Program since it is likely to yield a realistic interest of 2.35%. But at this moment, there is an inertia to make the change since I honestly believe BOC will likely adjust their rates within a year after getting their hands on the deposits.
Small Decrease In Total Interest Earned
People often forget about the increase in the quantum that earns the revised bonus interest of 1.8%.
Previously: 0.0225 x $60,000 = $1,350
From 1 April 2017: 0.0185 x $70,000 = $1,295
Since we generally do keep more than $70,000 in the OCBC 360 account, it’s a $55 decrease over a year, just a 4% drop.
Possible Alternatives We Are Looking At
There could come a moment in the near future when our situation might not qualify for these high interest “jump-through-the-hoops” accounts so we are definitely looking at alternatives to park our cash and emergency funds.
CitiBank Maxigain appears to be one such account and after 12 months (aka 12 counters), the interest rate could be close to 2%. The criteria of an increasing balance to qualify for the bonus interests isn’t too difficult to navigate past since one just has to transfer $10 to the account every month.
Perhaps I will pay Citibank a visit in the next week. Getting past the RMs at the branch at Waterway Point in itself would be a formidable feat.
Otherwise, I would be waiting for the SSBs to go above 2.5% again to park more cash there.