More OCBC 360 Account changes coming: Higher interest on paper, lower interest in practice

Back in July 2020, OCBC made some major changes to the OCBC 360 Account, cutting the headline rates and removing the bonus interest for credit card spending.

Now comes word that there will be another set of changes (the third so far this year) taking effect from 1 October 2020. 

In OCBC’s words: 

Interest rates have continued to trend lower since the Federal Reserve cut US interest rates almost to zero in March to mitigate the economic impact of the COVID-19 pandemic.

As a result, we have to make changes to the 360 Account (see summary below). If and when the interest rate situation improves, you may be assured that we will adjust our product offerings accordingly.

We thank you for your support and for being understanding.

These changes will see the effective interest rate for the 360 Account increased from 2.15% to 2.68% p.a, but unless you’re currently insuring and investing with OCBC, the interest you earn will decline. 

How is the OCBC 360 account changing?

From 1 October 2020, OCBC will make the following changes to the 360 Account’s bonus interest structure:

OCBC has restructured the interest bands from two tiers (S$0-35K/35-70K) to three tiers (S$0-25K/25-50K/50-75K), and modified the Wealth category. Long story short, the maximum interest you can earn on the OCBC 360 Account will increase from 2.15% to 2.68% p.a, and the interest cap will be increased from S$70,000 to S$75,000. 

That sounds great on paper, but look closer, and you’ll find that you just might be worse off. 

👎 Salary Bonus cut from 0.9% to 0.8% p.a

From 1 October 2020, the bonus interest awarded for crediting salary to the 360 Account will be cut from 0.9% to 0.8% p.a. The minimum monthly salary credit remains the same at S$1,800. 

To think: as recently as May, OCBC was offering an effective interest of 1.8% p.a just for salary crediting- more than you’re likely to earn from the entire 360 Account right now. 

👎 Save Bonus cut from 0.3% to 0.23% p.a

From 1 October 2020, the bonus interest awarded for increasing your average daily balance by at least S$500 from the previous month will be cut from 0.3% to 0.23% p.a. 

This bonus isn’t too difficult to hit, although you really have to pay attention to your average daily balance figure if you’re in the habit of regularly moving funds in/out and paying bills out of the account. 

👍👎 Wealth Bonus split into two categories, increased from 0.9% to 1.6% p.a

Currently, OCBC awards bonus interest of 0.9% p.a for the Wealth category. Customers who insure or invest in eligible OCBC wealth products will earn this bonus interest for 12 months

From 1 October 2020, OCBC will split the Wealth category into two sub-categories- Wealth (Insure), and Wealth (Invest). Each of these offers up to 0.8% p.a interest, which means you could earn up to 1.6% p.a, better than the current 0.9% p.a.

Here’s the thing though: if you only do one of the two, you’ll be slightly worse off from 1 October (0.8% p.a) than you are right now (0.9% p.a)- hence my mixed 👍👎 in the header.

I generally prefer to source my own insurance and do my own investments, so this was never a viable bonus category for me in the first place. 

👎 Grow Bonus cut from 0.8% to 0.4% p.a

I’ve never paid attention to the Grow bonus, given that it requires you to maintain an average daily balance of at least S$200,000- way more than I’m comfortable parking in a savings account. 

In any case, it’s being cut in half from 0.8% to 0.4% p.a. 

What does this mean for the “typical user”?

In my mind, the typical OCBC 360 Account holder is just crediting salary and earning the Save Bonus. This means he/she will see the following changes:

Assuming the balance is maxed out, the maximum interest earned each year is currently S$875. From 1 October 2020, that will drop to S$810- the lower interest rate of 1.08% (vs 1.25%) is slightly mitigated by the higher interest cap of S$75,000 (vs S$70,000). 

Let’s be frank though. Ever since interest rates started coming down, savings accounts have not been the ideal place to park your spare funds. In recent times, I’ve taken to putting short-term funds in Singlife, Dash EasyEarn, and Stashaway Simple. None of these will make you rich, but they’ll at least provide a hedge against inflation without making you jump through hoops. 

The real money is in the stock market, and while I don’t feel qualified to give stock tips, I can confidently say that a carefully curated portfolio of high quality equities, held over a long enough period, is going to give much better returns than any savings account. 

In other words:

Conclusion

OCBC’s 360 Account changes are no doubt negative, but that’s the general trend we’re seeing for savings accounts everywhere. I still keep my 360 Account out of convenience (because I have several GIRO arrangements tied to it), but don’t keep a significant balance inside. 

Stonks everybody. Stonks.