[this is a sponsored post by DBS, which has just relaunched its Multiplier account with a revised bonus structure. All opinions and analysis are those of The Milelion]
It’s safe to say that if you asked me about credit cards and savings accounts, I’d say a hundred words about the former for every word about the latter.
After all, credit cards mean miles and points. And miles and points mean first class spas, luxurious seats, vintage champagne, gourmet meals, overwater villas. Savings accounts, on the other hand, seem less glamorous by comparison. If credit cards are sexy, savings accounts are their plain Jane cousins: day-to-day ATM withdrawals, GIRO arrangements, fixed deposits, and a place for your friend to PayNow after you’ve generously offered to pay for dinner with your card first.
That said, savings accounts are ultimately what fund your miles adventures, and travel hackers have to park their money somewhere. Moreover, if we claim to be all about maximizing value when we travel, then we can’t have a blind spot where something as important as savings accounts are concerned.
The fact is, savings accounts in Singapore have pitifully low interest rates. Although I have fond memories of earning 4-5% interest on my POSB Savings Book as a kid (here’s an interesting retrospective about the time when savings accounts earned 9.5% interest), those days are long gone and 0.1-0.2% is now par the course. At least until the ABBAs started appearing.
The rise of ABBAs
Consumer gripes about perpetually low interest rates have led banks to create what I call “activity-based bank accounts” (ABBAs), which award bonus interest contingent upon completing a series of financial activities.
For example, you might earn bonus interest on your savings account when you credit your salary, make a certain number of bill payments, spend a certain amount with the bank’s credit cards, and buy investment products. All these activities earn revenue for the bank, a portion of which they return to you in the form of higher interest.
ABBAs advertise interest rates of up to ~3-4% depending on how many activities you complete. Bonus interest is typically capped on a maximum account balance of $50-70K (SCB is a notable exception, offering bonus interest up to a $100K balance cap).
There’s no shortage of ABBAs in Singapore, each with different mechanisms, bonus structures, kickers, and terms and conditions. I spent the better part of an afternoon trawling through websites to put together the complicated summary table below (that in itself should tell you that ABBAs favor the detail-oriented)
The question I had on my mind was this: which ABBA is most compatible with a miles maximizing strategy?
The problem for miles chasers
If you, like me, are trying to optimize the number of miles earned for every dollar of credit card spend, you’re going to run into the following problem:
A miles chaser cannot max out the interest on most ABBAs because satisfying the credit card threshold requires putting spend on a sub-optimal card
Or to be more specific: the cards that most ABBAs require you to use in order to hit the minimum credit card spending either don’t earn miles (UOB One/YOLO, all Bank of China cards, SCB BonusSaver) or do a crappy job of doing so (UOB Lady’s Card- 0.4 mpd anyone?).
To summarize the issue:
- UOB One: Only spending on the non-miles earning ONE/Lady’s Card/YOLO cards counts towards monthly spend
- BOC SmartSaver: BOC has no miles cards
- SCB BonusSaver: Requires you to use the BonusSaver credit card that does not earn miles
Only the following ABBAs allow you to incorporate a decent miles earning card into your spending:
- DBS Multiplier: Altitude, Woman’s Card (World + Regular)
- OCBC 360: Titanium Rewards
- Maybank SaveUp: Horizon Visa Signature
My problem is further compounded by the fact that I don’t buy unit trusts or investment products from banks because I don’t like the implicit fees involved.
My investments are predominantly equities, traded through SCB because of their low commissions (although that might change now that I’ve learned about lower brokerage fees from cash upfront services). However, SCB doesn’t recognise equity trades as part of the “investment” component of their BonusSaver account. I also don’t currently have a home loan with any of the banks (and in any case, only DBS and Maybank would consider home loan repayments as a bonus-able category). Long story short, I can’t enjoy the interest bonuses arising from investments either.
So where does that leave the would-be miles chaser?
Given that the interest rates offered by ABBAs are inherently linked to your behavior, it’s impossible to do comparisons without laying out scenarios. So I’m going to consider a miles chaser at three stages in his/her life- starting work, mid-career and advanced.
Scenario 1: Fresh Grad, $2.5K net salary, $500 credit card spend, $15K account balance
This individual is fresh out of university and eager to start building his or her miles balance. Here’s the options:
A few points to note about the above analysis
- I’m probably being overgenerous to the OCBC 360 account. To enjoy the bonus 0.3% interest on credit card spend, you need to put $500 per month on OCBC cards. Since we have assumed a miles chaser, his best option is the Titanium Rewards card. But this is a specialized spend card, earning 10X (4 mpd) on online and offline shopping plus mobile payments and 1X (0.4 mpd) everywhere else. Obviously this individual will have credit card expenses that do not fall into the 10X category, and unless he’s willing to earn 0.4 mpd on those, he won’t be able to hit the $500 a month spend requirement
- SCB has no interest for salary crediting in this scenario as it requires a minimum salary credit of $3K per month. But look, if you think I’m cherry picking, you can assume he earns $3K and the main difference in the table above is that SCB goes up to 1.35%, still not the best option
- This individual will not be able to meet the Maybank SaveUp three product threshold because his income of $30K means he’s only eligible for the Maybank Platinum Visa (a cashback card) as opposed to the Horizon Visa Signature
- This will be a recurring point throughout the three scenarios so best to address it here: if you want to play the miles game, you can ignore the UOB One completely. because the UOB One requires you to spend $500 with the One/Lady’s/YOLO card for you to earn any bonus interest; you can’t circumvent that requirement by doing another activity
We see that the DBS Multiplier account is clearly the best option for someone with this profile. Simply by using an Altitude card (good for general spending plus online hotels and flights) and crediting salary, this person can earn 1.85% interest with the Multiplier account.
Scenario 2: Mid-career, $5K net salary, $1K credit card spend, $40K account balance and housing loan
Now we consider the profile of someone who has been in the workforce for a few years, a mid-career professional. This person is likely to have a housing loan as well.
Here are the observations
- The Maybank SaveUp is a solid offering for someone with this profile, if he is able to put $500 worth of dining/petrol/taxi spending on the Horizon Visa Signature card. Remember that the Horizon Visa Signature earns 3.2 mpd on such spending so it’s a good deal as far as miles earning is concerned
- The OCBC 360 becomes less attractive in this scenario because the bank does not recognise housing loan repayments as part of the investment category
- For DBS I have assumed the individual takes a housing loan from the bank; if he does not then the interest rate goes down to 1.9%
It’d be hard to argue against the Maybank SaveUp in this case. The interest rate of 3% is well ahead of any other account, plus it doesn’t require him or her to forego miles earning thanks to the very excellent Horizon Visa Signature card that can cover dining/taxis/petrol.
Scenario 3: Experienced Professional, $15K net salary, $10K credit card spend, $100K account balance, active trading account
This individual commands a high paying job that requires frequent business travel and hence has the opportunity to put reimbursable business expenses on his personal cards. In addition to this, he has an active equities trading account through which >$5,000 of trades are done each month.
- The Maybank SaveUp value proposition is largely unchanged from Scenario 2, because the individual has already maxed out the 3 category bonus. The small difference between scenarios is due to a higher base interest on the account balance
- The DBS Multiplier favors an individual with this profile because it maxes out at 3.5% for a $30K transaction volume each month (sum of salary credit, credit card spending plus investments). Also note that the Multiplier is the only ABBA which counts online equities trading as part of the investment category
So if you’re a high earner who is also able to put big spending on personal cards, the Multiplier account provides the best platform for savings while still allowing you to enjoy bonus interest from spending on miles earning cards.
Summing it up
Both the Maybank SaveUp and the DBS Multiplier are good bank accounts for miles chasers.
The Multiplier is good if you fall at either extreme- someone who is just starting out in their career, or someone who is well-established and earning/spending in a high income bracket.
The SaveUp is a good choice for mid-career professionals who cannot tap into the highest brackets of the Multiplier, yet would be able to meet the three product category for the SaveUp through salary crediting, bill payments and use of the Horizon Visa Signature card.
One of the common objections I’ve heard from people about the miles game is that using the right card in each situation will mean giving up bonus interest on their ABBA. I hope this shows that there are ABBAs which are compatible with a miles chasing strategy, and you don’t have to settle for one or the other.