DBS has recently revamped their multiplier account on 1st Nov to reclaim their share in the deposit market. By lowering the minimum threshold for the total eligible transactions from $7,500 to $2,000, this enable more young adults to qualify for higher interest rate on their account balance with no minimum salary crediting amount and no minimum credit card spend. Let's explore in details how we can qualify for the bonus interest!
Basically there are 5 transaction components that add up to the total eligible transaction for the month. Here are the 5 transaction components:
1) Salary crediting
2) Credit card spending
3) Home loan
4) Insurance
5) Investment
There is no minimum spending criteria on each on the component but Salary crediting is a compulsory component in order to qualify for the bonus interest. There are different tiers of interest bonus based on the total transaction amount and number of transaction components. The minimum 1.55% interest can easily be earned by having a transaction amounting to just $2,000 by combining salary crediting with another component. Let's explore in the below case studies of how individual benefit from this account at different stages of their life.
Scenario 1: Fresh polytechnic graduate drawing a salary of $2,200
A fresh polytechnic which has just graduated drawing a salary of $2,200 & crediting his net salary of $1,760 in the multiplier account after CPF deduction. Taking in consideration applying a credit requires an annual income of $30k, the credit card spending is not applicable. Home loan is also not applicable in this case. This left the individual to take up either insurance or investment with the bank to top up the transaction amount to $2,000 to qualify for the bonus interest. This will result the account earning interest between 1.55% to 1.8%.
Scenario 2: Fresh University graduate drawing a salary of $3,000
A fresh University graduate drawing a salary of $3,000 & crediting his net salary of $2,400 in the multiplier account after CPF deduction. Home loan is not applicable in this case. Individual will most likely apply a credit card at this stage and spend an average of $300 every month. On top of that individual will consider to do some insurance or investment with the bank with the excess income. This will result the account earning interest between 1.85% to 2%.
Scenario 3: Married adult that has been in the workforce for a few years drawing a salary of $5,000
A married adult who has been in the workforce for some time drawing a salary of $5,000 & crediting his net salary of $4,000 in the multiplier account after CPF deduction. Home loan is applicable in this case which add up $1,200 to the total transaction amount. Coupled with the credit card spending, this will result the account earning the next tier interest which is 2.2%.
In conclusion, as we move along different stages of life, our total transaction amount increases as well which result in greater interest!
Peer comparison
The closest savings account comparison against DBS multiplier account would be OCBC 360 and UOB 1 account. Since the all the 3 accounts have common component of salary crediting and credit card spending in their bonus interest calculation, we shall take the minimum amount for interest calculation. Based on the above table, DBS multiplier account stand out against its competitor netting the highest interest of 1.85%.
The cons?
Perhaps the only con of this account would be having to maintain a daily average balance of $3,000 per month if not a hefty $5 fall-below fee would be deducted every month. (Most account only charge a $2 monthly fall-below fee) If you have a trouble maintaining a minimum saving of $3,000 every month in your account, you might want to give this account a miss.
Conclusion
I would say that the revamped DBS multiplier account launched would be a big blow to its competitors. DBS not only able to gain deposit market share of those earning less than $2,500 but also attracting young working adults that have been using OCBC or UOB accounts to consider a switch given the better interest bonus.
In terms of marketing their products, DBS have successfully introduce additional components such as investment, insurance and home loan in their bonus interest calculation. This would encourage consumers to take up these products with the bank to earn higher interest.
If you have been using OCBC 360 account or UOB 1 account for some time, it's probably time for you to switch to DBS multiplier account to take advantage of its higher interest!
