Category Archives: Banking

Financial alternatives to UOB Krisflyer and reflections on a crash

A lot has been said in recent days about the new UOB Krisflyer account, not just on this site, but by others in the general finance space.

If I could summarize my problem with the product in one sentence, it’d be that the upside to you is capped (in the form of the 5% cap on bonus miles) while the downside to you is unlimited (in the form of 0% interest on your entire balance).

So I’ve made my stance on the matter pretty clear. Still, I’d encourage those of you who are undecided to have a read of some of the coverage on other sites like Dollars and Sense, Moneysmart and even this one piece on Bank Bazaar that tries to take an alternative viewpoint. Read up, understand the product, do your sums and come to your own conclusion.

Financial Alternatives to the UOB Krisflyer account

The only thing I want to add to this is the one piece that was missing from all my analysis- what the opportunity cost of putting your money in a 0 interest account is. I mean, I did talk about it in terms of miles, but I didn’t talk about alternative investments like fixed deposits, equities and the like.

This is because I’m terrible at investments. I mean, I collect miles for goodness sake. They don’t earn interest, they’re not insured and they can only ever be devalued. But man, the experiences you have

Fortunately, Fiona from SG Budget Babe is better at such things, and she’s kindly prepared some alternative investment options for your consideration (for the record, she was the one who gave me the heads up about the influencer posts that were going around Instagram).

I’d encourage you to have a full read over on her site, but here are the key tables for your reference. The investment options here aren’t exhaustive, of course, but they’re common financial instruments available to most investors.

I’ll discuss the 1 year investment horizon scenario here (she’s prepared a 3 year scenario on her site as well), because we’re not clear what will happen to the UOB Krisflyer earning rates after the first year promotional period, and where equities are concerned we need to make significant assumptions the further out we go.

For a 1 year investment horizon

For a 1 year investment horizon, assuming a $30K deposit and $500 card spending a month, you’d have 8,400 miles with your UOB Krisflyer account. Assuming a 2 cpm value, that’s about $168 of interest. This is slightly over half what you would get if you put it in 0 or virtually 0 risk investments like Fixed Deposits or SSBs. If you were willing to put it in a REIT, you could get significantly more (assuming, of course, you pick the right one) not just from dividends, but capital gains as well.

Even if you spend $1,000 a month, you’d be on 16,800 miles or roughly $336 of value. I realise that’s on par with the 0 risk investments, but you need to factor in the fact that miles are a non-liquid currency. In any case, I’m going to fall back on my thesis statement made elsewhere that if you’re after miles, there are better cards for getting them.

Reflections on a crash

On another note, The Milelion had a server outage that started intermittently around 9 or 10pm last night and escalated into a full website crash all the way until 10.45am this morning.

I am clueless about IT issues (I’ve barely poked around my back end, fnar fnar) and in the space of time between I woke up at 6am to full restoration, I had to learn a lot of acronyms I’d rather not know like CDN, DDOS, TOS, DNS…

Suffice to say, the diagnostics showed the crash was due to a spike in CPU usage beyond which my hosting plan allowed. This caused the hosting platform to suspend access to the site until it was optimized. This has since been done and regular services resumed. I’ve also upgraded the site’s security to prevent a future recurrence.

I don’t have enough technical knowledge to say whether this spike was because of the sheer number of visitors (we crossed 50K yesterday (and imagine what that would have been without the outage!), compared to the usual 3-4K) or whether it was caused by something malicious, and it would be irresponsible to speculate (Russians!).

But I do thank all of you who reached out to let me know something was up, and the others who offered to put me in touch with IT people/other hosting services who could help me resolve it. It means a lot to me that you’d go out of your way to render help to someone you met on the interweb.

Group hug y’all.

Image result for grouphug

It’s quite incredible how the past 7 days started with the excitement of what seemed to be a game changing product, turned to disappointment when the fine print was revealed, turned to ridicule at the defense raised by the bank, turned to anger at the influencers involved in promoting a product they clearly knew nothing about.

But let’s face it- this will eventually fade. UOB will have future product launches. Some will be good, some will be bad. Influencers will continue to promote products. Some will be good, some will be bad.

What is important to me is that The Milelion and its guestwriters continue to call things as we see them, and maintain the highest standards of ethics in our writing.  I was very moved by the support in the comments section of the influencer article, and will work tirelessly to keep the trust you guys have placed in this site.

Group hug again.

Image result for group hug

So keep reading, keep questioning, and keep taking part in the comments and FB discussions. Let’s make this a place where anyone can learn to travel better for less.

An open letter to the influencers who promoted the Krisflyer UOB account

Dear fellow influencers,

I’m glad you’re all as excited about the new Krisflyer UOB account as I am. I mean, why else would you all have, in a coordinated and synchronized manner, simultaneously posted Instantgram posts on the very day the UOB Krisflyer account was launched?

I have to admit, I feel really noob reading all your posts. After all, you guys take better photos than me, have more aesthetically  pleasing bodies than me and also got more followers than me. Staring at your followers list makes me feel like proverbial urchin staring through shop window on cold Christmas eve.

Now, because none of these posts were tagged #sponsored, #ad, #advertorial, or #theypaidmeinsmallunmarkedbills, I must assume that these are all impartial reviews based on your personal experiences with the product. Therefore, I am genuinely concerned that you guys are missing out on some of the best opportunities to earn miles.

Fortunately, I can help you here! I’ve done some research on the account and while I feel that the overall idea is definitely innovative, there are things that could potentially be improved on. I really hope that UOB takes notice of these and makes some changes so that a great idea doesn’t get let down by poor execution.

Hope this helps!

Dear ladyironchef

I love your food porny posts and the way you introduce to me new restaurants all the time. You’re the reason I haven’t seen my feet in years and have the turning radius of a small van. And am currently going to die alone.

However, it seems like you are paying for your restaurant expenses with the UOB Krisflyer debit card. I think this is a mistake. You see, you could easily be earning 4 mpd on all your local dining and online expenses with the HSBC Advance cardwithout cap, all the way until 31 May 2017!

Yes, I know the card is a bit of a pain in the butt to get, but trust me, when you’re earning unlimited 4 mpd without an arbitrary 5% cap and a chunk of money earning 0 interest in the bank, it is the most shiok feeling ever. More shiok than when the Sin Huat crab beehoon uncle actually treated me with dignity and respect and never try to upsell me. Happy days man.

But what happens after 31 May, you ask? Well, we can hope that HSBC, from the kindness of their hearts, decides to extend this promotion again as they have done time and time again in the past. But if they don’t, you might fancy gambling and applying for the UOB Preferred Platinum AMEX and hope they take your application, failing which you could get the Maybank Horizon Visa Signature card which gives 3.2 mpd on dining. Not as good as 4 mpd, of course, but might be better than parking funds in a 0 interest account.

Dear melissackoh

I love your posts because your photo skills really zai. Every time I see your posts I wonder why I must use Blackberry camera to take all my photos. Then I remember that blur out of focus bokeh is the new black(berry). Ha ha ha!

In your post you implied your trip to Sydney was made possible thanks to the UOB Krisflyer account. I am excited because I also want to go Sydney and see koalas boxing wallabies, which I hear is on the national flag.

Now, it takes 56,000 Krisflyer miles for a round trip Economy saver award between Singapore and Sydney.

If you have $3K-$100K in your Krisflyer UOB account (let’s take $51.5K as the middle value), you’d be earning 1.4 mpd, the bonus component of which (1 mpd) is capped at 2,575 (5% of $51.5K) per month.

To earn those 56,000 miles, you’d need to spend $5,250 a month for a year on your Krisflyer UOB debit card (25,200 base miles, 30,900 bonus miles- remember, bonus is capped at 2,575 a month!) for a total outlay of $63,000

But assuming you spent an average of 30% on dining out, 30% on online shopping and 40% on everything else, with the right card strategy (HSBC Advance + DBS Woman’s World/Citibank Rewards + UOB PRVI Miles) you could get a weighted average of 0.3*4 +0.3*4 +0.4 *1.4= 2.96 mpd! This means you’d only have to spend <$19K in a year to get that Sydney trip!

Plus, you’d be able to put that $51.5K to work for you in koalas boxing wallabies futures. I hear the return on that is non-zero.

Obviously, the equation changes if you have 100k+ in your account, but if you are parking $100K+ without interest in the bank, please let me know who your influencer agency is because mine is clearly not doing its job properly.

BTW, please don’t go to Pancakes on the Rocks. Last time I was in Sydney everyone told me that was THE place to go to, but I thought it was super average. This is why I don’t like people.

Dear bellywellyjelly

I love your travel posts. Super bohemian one. I wish my Bangkok trips could be as awesome as yours but I am scared of new experiences so every time I go it’s Paragon–>Roast–>After You–>Patpong–> Emporium

(EDIT: Posts have since been updated with #ad tags)

In one of your posts, however, you mentioned this-

Here’s a tip, use the #KrisFlyerUOB Account on your fav budget airlines Scoot & Tigerair to get complimentary additional baggage allowance plus FREE seat selection and more 😉 (got you covered here)

Don’t worry! Bro got you covered too!

You might like to know that your complimentary additional allowance  (5kg) only applies if you buy a minimum of 20kg luggage allowance. And you need to buy this 20kg at the time of booking, not after! If you buy after, hard luck.

Also, you talked about complimentary seat selection. I am balding and have bad BO, so no one wants to travel with me. But if you travel with your friends, you need to know that only the principal cardholder gets free seat selection, even if the other travelling parties are on the same booking.

PS- I’m a bit confused, because from the way you’ve written your post…

Scratched this off my bucket list on my trip with #KrisFlyerUOB, the first debit card & account in Singapore. 

…it kind of makes it sound like you’ve already been able to travel with the miles you got from this account. Which is quite impressive given that it was only launched a few days ago, and (assuming your situation matches melissackoh’s) you’d have had to have spent ~S$56K to get the 25,000 miles you need for a round trip economy saver (you see your bonus 1 mpd is capped at 2,575 miles each month, meaning you’d have to earn the remainder 22,425 miles at 0.4 mpd)

Moreover, as per the T&C of the UOB Krisflyer debit card, any miles earned only get credited to your Krisflyer account at the end of the month. And it’s only 24th April. If you have lobang for faster miles crediting, please share ok?

Dear thetravelintern

Hope you guys are doing well. I liked that quote by Eleanor Roosevelt you shared- “Do one thing every day that scares you.” This morning I tried using 1 ply toilet paper instead of my usual 2. Don’t want to tell you how that went but the important thing is I tried.

You guys mentioned this in one of your posts-

Great travel perks such as free seat selection and convenience fee waiver when booking flights — no more additional charges to deal with while planning your next big adventure

Regarding the free seat selection- see the advice I gave bellywellyjelly. Regarding convenience fee waiver- take care guys. I know it sounds good but you need to spend a minimum of S$250 on a Scoot/Tigerair booking on a single transaction first. Then you’ll get a fee waiver voucher that can be used on your next booking.

So technically, you should be saying “no more additional charges to deal with while planning your next next big adventure”.  Also, be aware that you get a maximum of one waiver a year per account yeah?

You guys say the Krisflyer UOB debit card is helping you achieve your travel dreams. Let me see if I can help you out there- it takes 25,000 miles to go to Laos in economy saver on Silkair. Assuming the same figures I gave to melissackoh, you would need to spend $1,500 a month, or $18,000 a year to get the miles you need (7,200 base, 18,000 bonus).

But if you used my recommended card strategy @ 2.96 mpd, you’d only need to spend ~$8.5K! Anyway guys, I recommend you save your Krisflyer miles for long haul redemptions. You could get to Laos for <S$400 return trip with budget airlines.

So that’s my advice!

My fellow influencers, let us continue to maintain the highest standards of transparency and miles earningness. Without us, the public is lost.

The Milelion

The Krisflyer UOB Account is Dead on Arrival (updated)

UOB launched a new product yesterday, the Krisflyer UOB account that allows you to earn miles through your debit card spending. The rate of miles earning varies depending on your total balance in your account.

The premise sounded intriguing, but there were few details. Would there be a cap on miles earning? Would the account earn any interest? What other terms would be lurking beneath the surface?

Well, the product webpage and T&C have since gone live so I’ve spent some time examining the fine print.

And I cannot begin to tell you how bad this product is. 

Here’s the product summary-

Fees & Charges
-Initial opening balance of S$1,000
-Annual fee of S$53.50 for debit card with first year waived
-Minimum balance of S$1,000 must be maintained, otherwise S$2 per month fall-below fee applies
-S$30 early closing penalty (within 6 months of opening)
-S$10 per additional chequebook

-1,000 bonus miles when you apply and charge a min of S$500 to the Krisflyer UOB Debit card within 30 days of approval (first 50,000 applicants- UOB strikes again!)
-Base mpd: 0.4 (with min S$500 spending in a calendar month)
-Bonus mpd: You earn this additional component depending on your overall account balnace

  • S$3K to <$100K: 1 mile
  • S$100K to <S$350K: 3 miles
  • More than S$350K: 5 miles

-Automatic miles conversion to Krisflyer

Benefits on Scoot & Tiger Airways
– Priority check-in and boarding
– Additional baggage allowance
– Standard seat selection
– Convenience fee waiver

Why is this so bad? Let me count the ways

No interest is earned on this account

I suspected this yesterday, but now it’s confirmed. You gotta spend money to earn miles. Your money will earn ZERO interest in this account.

That is implausibly bad. I mean, I love miles as much as the next dude (correction: way more than the next dude) but I’m not going to have S$100K sitting idle just so I can earn 3.4 mpd on my spending. Besides, if you know how to maximise your 4 mpd opportunities this becomes an even worse deal.

For many people, this will already be a dealbreaker. But it gets better…

Your bonus miles are capped, making your effective mpd lower the more you spend

The T&C alludes to a cap, but doesn’t specify what that cap is. However, if you look at the bottom of the promotional webpage, you’ll see this little line that has a dramatic impact on how you view the product-

In case you can’t read that, it says

Bonus Krisflyer miles earned will be capped at 5% of the Monthly Average Balance in the Krisflyer UOB account

This confused me at first because it was comparing miles to money, something that’s not immediately intuitive. What I understand now is that the maximum number of miles you can earn per month is capped at 5% of your monthly average balance (MAB).

So, if your MAB is $350K, you can earn a maximum of 5% of $350K= 17,500 per month. See why that’s confusing? You’re comparing miles and money.

Assuming something possessed you to put $350K in a 0 interest earning account, your math would look like this-

click to enlarge

Can you see that once you get beyond S$3,240 of monthly spending, you’re only earning 0.4 mpd on each incremental dollar? That is insane.

Look at the last column- the more you spend, the lower your effective MPD. For someone spending $8,000 a month (not too far a stretch for someone who can afford to park $350K in the bank at 0 interest), you’re earning an effective mpd of 2.5.

If you opt for a more sane amount of maybe ~$100K, the picture gets worse-

click to enlarge

Suppose you spent $5,000 a month. You’d be earning 1.4 mpd, which is something you could get with a UOB PRVI miles card, without having to park $100K in a 0 interest earning account.

Play around with the calculator if you want, but the basic facts don’t change. The presence of the cap means that not only do you lose out on the interest, you lose out on what the product is ostensibly supposed to be good for- miles earning.

The bonus miles are for a promotional period only

If those caps weren’t enough to put you off, do note that the T&C imply that the bonus miles (1/3/5 depending on your MAB) is for a promotional period only. No knowing what will happen after that ends.

The Tigerair/Scoot benefits aren’t real benefits

Even if you’re the type who does a lot of regional travel on budget carriers, I wouldn’t get too excited about these benefits-

  • Priority Check-in: Your entire party enjoys priority check-in and boarding. This is nice to have, but not something I’d pay for anyway
  • Complimentary Seat Selection: This would be a fairly decent benefit, but for the fact that it’s limited only to the principal cardholder. So if I’ve booked a party of 3, only I get to select my seat for free. That kind of defeats the purpose, given that I’d want to seat us all together. If anything it sound suspiciously like a way of upselling you to shell out for the other 2
  • Complimentary Additional Baggage: Pfffft. Not a real benefit because of the strings attached. It requires you to buy a minimum 20kg baggage allowance, after which you’ll get a bonus 5kg. And you only get this benefit if you buy the baggage allowance at the time of booking. If you add baggage after initial purchase, you’re SOL.
  • Convenience Fee Waiver: This was always a major source of annoyance to me, so I was glad to see a waiver was offered. But once again, it’s not really a benefit. You need to spend S$250 on a Scoot/Tigerair booking in a single transaction, then you’ll get a fee waiver voucher that can be used on your next booking, and here’s the best part. You only get one fee waiver voucher per year

These “benefits” are easily the most ham-fisted and stingy I’ve ever seen (and this from a longtime Krisflyer member). It’s like they really didn’t want to give anything, but finally relented as a favor to you. It’s almost bordering on satire.

I gave OCBC a hard time for its sponsored post, but if I were their marketing team I’d be jumping all over this so called “benefit” as a prime example of how other banks don’t market transparently. If they put front and centre the limitations (most noticeably the fact that the convenience fee waiver is ONCE a year), do you think they’d dare to market this as boldly?

Is there an upside?

It’s really, really hard to think of anything good that can come out of this. But HWZ user dahnoob has a decent idea-

This is actually a decent product to replace the PRVI, provided that you have $3000 lying around and don’t mind locking them in. The advantage of this debit card over the PRVI is that you don’t need to pay anything for points transfers, and they happen automatically every month. The drawback is of course the lack of interest free payment period. Realistically, you would want to put in more than $3k, because charges are debited from the account itself. God knows whether UOB will refuse you your 1.4mpd because ‘your balance fell below $3000 on 21 April, between 10.30pm to 10.35pm’.

(I strongly suggest you read the rest of his/her analysis because it’s spot on)

I agree with him/her. If you’re someone who doesn’t hit the income requirement for a PRVI card (S$80K per annum) but you do spend >S$500 a month, you could put S$3K in this account and ensure that your MAB is above that. It’ll be a bit of micro management, but you’d then have a PRVI card without the conversion fees. Note that you wouldn’t enjoy the 2.4 mpd on overseas spend, of course.

EDIT: As Tim pointed out on the comments below, even if you do this the 5% mileage cap comes back to bite you. A 5% mileage cap on a $3K MAB is 150 bonus miles. 150! Your effective is hence a lot lower than 1.4 mpd.

As per UOB’s own calculator a MAB of $3K with monthly spend of $500 gets you 4.2K miles a year or 0.7 mpd. Wow. The odds keep stacking up against you.

How could they even think this would work?

UOB says it anticipates to draw in S$1.5B from funds deposited into these new accounts. Let me assure you that not a single cent of that S$1.5B will be from me.

I have no idea what was going through the minds of the UOB product team when they came up with this. Who did they think they were targeting?

  • Students? (But which students spend >$500 a month (cool kids probably))
  • Young professionals who can’t get a “proper” miles earning card? (Now that the DBS Altitude income requirement is only $30K this doesn’t hold water)
  • Retirees?   (But can’t they get a secured credit card or simply hold on to the ones they had before retirement?)
  • Cash rich/miles poor people? (You don’t get cash rich by being investment dumb, and I’m sure this group would have identified the 5% cap as a major barrier to adoption)
  • Gullible people? (probably)

I’m sure over the next few weeks you’re going to have a friend who knows you’re into miles come up to you and say “wah did you hear about the new UOB thing? 5.4 miles leh!” Your job, nay, your duty, is to correct this poor soul and ensure they do not get anywhere near this product.

Say something nice about this product? Sure. I think the card is damn chio.

UOB Team, whatever you’re smoking, I want lots of it.