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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.

Excelsior!
The Milelion

UOB defends the Krisflyer account while missing the point (edit: original article added)

Source: Business Times © Singapore Press Holdings Limited. Permission required for reproduction

[Edit: Here’s the original article for those of you who don’t have a subscription to the BT. Cost me $72.76. You’re welcome]

Download (PDF, 6.23MB)

Well, that escalated quickly.

When the Krisflyer UOB account was first announced, I, like many other people in the miles and points game, was very excited. The 5.4 mpd figures they were throwing about were head and shoulders above anything currently offered in Singapore. The idea of a bank account that let you earn miles was something new and potentially gamechanging- if they could get it right.

But then the full details came out, and that excitement turned to disappointment. If you wanted to earn that 5.4 mpd, you’d have to park at least $350,000 in a bank account earning no interest. Your miles earning would be capped at 5% of your bank account balance, meaning that once you spent beyond a certain amount, you’d earn 0.4 mpd instead of the headline 5.4. The trumpeted benefits with Scoot and Tigerair came with so many strings attached they might as well not be used. And to top it all off, the headline rates were promotional only, with no guarantee of renewal.

I doubt I was alone in my disappointment, because the post I wrote went on to blow up in a big way- 23K+ impressions on Facebook, which is something of a record for this site. To put it another way, the Krisflyer devaluation was huge, but that only bumped about 7.5K.

And it’s not just me. The laojiaos on HWZ (who know much more about all this than I do) are also cheesed off. Coverage on other sites like The ShutterWhale has similarly been negative.

I guess that’s made UOB sit up and take notice, because it’s come out to defend its product in a Business Times article published today. (I’m quoted in the article but was not contacted directly by the journalist) Unfortunately, the article is behind a paywall, but I’ve purchased a copy that I’ll share as soon as SPH emails it to me.

The sad thing about UOB’s response is that they’ve completely missed the point. The UOB Krisflyer account is supposed to be for those people who want to earn Krisflyer miles. If that’s the case, why is it so bad at what it’s supposed to be doing?

Let’s go through the points that UOB made one by one.

“While UOB did not dispute the calculations in the post, it said that the Krisflyer UOB account combines a debit card and current account to award air miles, designed for millennials and frequent flyers on the insight it has into their lifestyle, spending and savings choices.

“Our consumer insight tells us that this account, which has an accelerated earn-rate for Krisflyer miles, will be attractive to those who would rather have free flights instead of earning interest,” said a UOB Spokeswoman

Ah, millennials. That nebulously defined group of people about whom marketers seems to know so much. I’m a millennial, and I often wonder why every single article I read about me doesn’t seem to describe me at all.

UOB said at the launch of this product that “the account provides millennials in the early stages of their career who may not be eligible for a credit card to accumulate KrisFlyer miles”

If that is an important pillar of the value proposition, we need to examine it closely. First, what exactly is a millennial? I assume in this context they’re talking about a fresh grad, young professional who just entered the workforce. What would that person look like?

The median graduate from SMU/NUS/NTU would be drawing a salary of S$3,360 a month, as per this ST article. That’s well within credit card eligibility territory. Even if you were suay enough to pick the degree that has the lowest starting pay (SIT DigiPen Bachelor of Arts in Game Design – $2,490), after your annual bonus you will almost certainly be able to hit the magic $30K mark that opens up credit cards.

Suppose you’re a Poly grad- what then? You’d still be well within the income requirement needed for a credit card. Take a look at these MOM-published starting salaries for poly folks

Download (XLSX, 38KB)

A post-NS poly grad would pull ~S$2.3-2.5K per month, which after a 13th month bonus would still be enough to get a card.

Therefore I can’t understand the claim that this product is somehow opening up the miles earning world to “millennials”, if we define the word that way. Sure, a new graduate would not be able to get a UOB PRVI Miles card (S$80K min income), but as we shall see in the next section there are many other good options available.

With the Krisflyer UOB account, customers with a monthly average balance of S$20,000 and a monthly spend of S$1,000 would, over one year, be able to earn the equivalent of a return trip to Bali on Singapore Airlines”

Let’s look at this hypothetical person that UOB describes, with an MAB of S$20K and monthly spending of S$1K. With UOB’s Krisflyer account, you’d earn 16,800 miles over the course of a year.

If you spent that same S$1K a month on an entry-level credit card like the DBS Altitude (min income: S$30K, 1.2 mpd on general spending), you’d be just 3K miles short of the 15K needed for a return trip to Bali on SQ.

But if you spread your S$1K monthly spending intelligently around two DBS cards (just two! I’m not going to propose my usual crazy 5 card strategies here) and spent 30% online (DBS Woman’s Card, $30K min income, 2 mpd online spending) and a weighted equivalent 10% on travel (DBS Altitude, S$30K min income, 3 mpd on travel), you’d have 19,440 miles in a year. 

What I’m trying to show is that with a little bit of planning, and only 2 entry-level credit cards, you’d get that trip to Bali, plus you’d be able to put that S$20K to work for you in stocks, bonds, or any other investment that earns a non-0 interest rate. Millennials like planning, right?

Even if you do not qualify for a credit card, a secured credit card is still an option. A secured version of the DBS Altitude card can be obtained by anyone aged 21-70, with a minimum S$10K pledge to the bank.

Your S$10K would not earn interest, but

  • It’s still better than not earning interest on S$20K
  • You would earn 1.2 mpd on general spending (2 mpd overseas, 3 mpd on travel max $5K per month) with no limits 

That, to me, is head and shoulders better than earning a maximum 1,000 bonus miles each month under the UOB arrangement (5% of $20K)

So the hypothetical person that UOB describes has much, much better options for earning both miles and interest.

“A bigger spender of S$3,000 a month for 12 months and monthly average balance of S$350,000 would earn 194,400 Krisflyer miles in 12 months which can be redeemed for one return business class ticket to New York on SIA (worth about S$6,200 on business saver)”

UOB then gives the example of a bigger spender with S$3K monthly spend and a MAB of S$350K. This guy earns 194,400 miles, enough to get a return business ticket to New York (184K miles)

Ok, big spender. First of all, I find it hard to believe anyone could, in good conscience, put S$350K in an account earning 0 interest. There surely must be some law against that. The scenario just doesn’t seem realistic to me.

But fine, in improv you’ve got to roll with the situation so let’s see what we can propose for him.

It’s clear that if you’re spending S$36K a year, even if you somehow managed to convert all that into 4 mpd spending, you’d only hit 144K miles. I know that if you intelligently use sites like Kaligo (up to 13 mpd!) you could bump that 4 mpd upwards, but, realistically speaking, you wouldn’t be able to get 184K on S$36K of spending.

But wait! If I were to sign up for an OCBC Voyage Card and take the S$3,210 annual fee offer, I’d get 150K Krisflyer miles (never thought I’d see the day I used this card as a good example!). Then I could sign up for a Citibank Premiermiles card and, assuming I’m a new customer, get 42K miles for spending S$10K in the first 3 months and paying an annual fee of S$192.60.

So all in all I’ve spent about ~S$13K and have 192K miles (vs S$36K and 194.4K with UOB). And I didn’t have to park S$350K in a 0 interest earning account.

This, of course, assumes the person in question meets the income thresholds for both cards (S$120K for the Voyage, S$50K for the Premiermiles). But come on- if you can park S$350K at 0 interest, you’re probably fairly wealthy.

“On the first day alone, hundreds of Krisflyer UOB accounts were opened and more than S$4 million deposited with us,” she said.

That’s great, and congrats to UOB and all, but that doesn’t say anything in and of itself. This is commonly known as argumentum ad populum (thanks, AS profs!), or a fallacious argument that concludes a proposition is true because many or most people believe it.

In any case, let’s examine that claim. She said “hundreds”, so let’s assume 500 accounts were opened (otherwise I’m sure they’d have played it up and said “thousands”). If S$4M was deposited, that means the average account size is S$8,000. Which means that this average guy would be earning 1.4 mpd, assuming he spends a minimum of S$500 a month on the Krisflyer UOB debit card. And the maximum bonus he could earn per month would be 400 miles  (5% of $8,000). Which means that once he spends more than S$400, he’d be earning 0.4 mpd. Dude.

“For a customer who prefers to earn interest over air miles, we would recommend they deposit their money into a fixed deposit or savings account to earn interest at the prevailing market rates”

But guys, it’s not a trade off. 

On the 12-month promotional period, she said that “this just means that we will review it then to make sure we have a competitive product with competitive miles earn rate for our customers. It does not mean that the bonus miles will end after next year

That’s fair enough. UOB may increase the bonus miles earning rate after a year, they may decrease it, they may do nothing. We don’t know. But that uncertainty is in itself a problem. I guess you could argue that if they change the terms later you could just take your funds out and close the account, and you’d be right, but let’s circle back to a central problem- are you really going to forgo interest altogether?

So that’s my take on UOB’s response. What UOB is missing (deliberately or otherwise) is the fact that if you want to sell this product as a miles churning machine, you cannot have a 5% cap on bonus earning. That’s a complete contradiction.

That said, I am sure the product will be a moderate success because, unfortunately, there are enough people out there who will get giddy about the 5.4 figure and not read the fine print. But to those of you who are reading this, please- there are better ways of racking up the miles. Don’t settle for less.

PS. BT- next time you need a quote call me maybe. I have lots of file photos of myself in speedos you can use too.