UOB One cuts interest rates. What to do next?

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Savings

By Gerald Wong, CFA • 03 Apr 2024 • 0 min read

The interest rate on the UOB One savings account will be cut from 1 May. We find out if we should switch to another account to make our savings work harder.

uob one account interest rate cut 2024
In this article

What happened?

The interest rates on savings accounts are starting to be cut.

UOB announced that the interest rates on its flagship UOB One savings account will be cut from 1 May 2024.

Shortly after, Standard Chartered also announced that the maximum interest rate on the BonusSaver (Bonus$aver) account will also be reduced from 1 May

While the Fed had indicated that interest rates will be cut this year, and we have seen a decline in T-bill yield and fixed deposit rates since late last year, many were still surprised by this piece of news.

Naturally, the Beansprout community was full of discussion about what we should do with the cut in UOB One interest rates to make our savings work harder for us.

Let us explore a few options on what we can do to maximise the interest earned on our savings account. 

How will UOB One interest rate change? 

There will be several changes to the UOB One Account from 1 May 2024.

Firstly, there will be a revision of interest rates, with the maximum interest rate earned for up to S$100,000 of savings cut from 7.8% p.a. to 4.50% p.a.

In addition, two new balance tiers will be introduced, such that the maximum bonus interest earning balance will be increased from S$100,000 to S$150,000.

You will be able to earn an interest rate of 4.50% p.a. for the portion of account balances above S$100,000 and up to S$125,000. 

Thereafter, you will be able to earn an interest rate of 6.00% p.a. for the portion of account balances above S$125,000 and up to S$150,000.

The revision of interest rates on the UOB One account will apply to all new and existing UOB One accounts.

The table below summarises the revised interest earned on the UOB One account from 1 May 2024. 

 

Total interest p.a. with effect from 1 May 2024

Account balanceMeet card spend of minimum $500Meet card spend of minimum $500 AND make 3 GIRO debit transactionsMeet card spend of minimum $500 AND credit salary
First $30,0000.65%2.00%3.00%
Next $30,0000.65%2.00%3.00%
Next $15,0000.65%2.00%3.00%
Next $25,0000.05%3.00%4.50%
Next $25,000 (New)0.05%3.00%4.50%
Next $25,000 (New)0.05%0.05%6.00%
Above $150,0000.05%0.05%0.05%

For comparison purposes, the table below shows the interest rate earned on the UOB One account currently. 

 

Total interest p.a. currently

Account balanceMeet card spend of minimum $500Meet card spend of minimum $500 AND make 3 GIRO debit transactionsMeet card spend of minimum $500 AND credit salary
First $30,0000.65%2.50%3.85%
Next $30,0000.65%3.00%3.90%
Next $15,0000.65%4.00%4.85%
Next $25,0000.05%0.05%7.80%
Next $25,0000.05%0.05%0.05%
Next $25,0000.05%0.05%0.05%
Above $150,0000.05%0.05%0.05%

As the interest rates earned on the UOB One account is tiered, we can calculate the effective interest rate earned on the UOB One account for different amount of balances we have.

The effective interest rate is the total annual interest earned as a percentage of your average balance in the UOB One account over the year.

We shared previously that the UOB One Account offers one of the highest effective interest rates of up to 5.0% per annum.

With the change on 1 May, the highest effective interest rate on the UOB One account will fall to 4.0% per annum. 

  • The highest effective interest rate falls to 3.0% p.a. from 4.07% p.a. for deposits of up to S$75,000.
  • The highest effective interest rate falls to 3.38% p.a. from 5.00% p.a. for deposits of up to S$100,000.
  • The highest effective interest rate for deposits of up to S$125,000 will be 3.60% p.a.
  • The highest effective interest rate for deposits of up to S$150,000 will be 4.00% p.a
 

Maximum effective interest rate for saver who meet card spend of minimum $500 AND credit salary

Account balance

Current

From 1 May 2024

First $30,000

3.85%

3.00%

$30,000 to $60,000

3.88%

3.00%

$60,000 to $75,000

4.07%

3.00%

$75,000 to $100,000

5.00%

3.38%

$100,000 to $125,000

4.01%

3.60%

$125,000 to $150,000

3.35%

4.00%

How we are maximising our interest earned with the latest UOB One interest rate change

Since the announcement of the change in interest rate for the UOB One account, we have been exploring different options in the market to find out what is the best strategy to maximise the interest we can earn on our savings.

The short answer is that – it depends on how much savings we have. 

Let us go through some of the different options that we can consider.  

#1 – If we have $150,000 of savings

The first question that some in the Beansprout community asked is “If I have S$100,000 of savings in UOB One currently and another S$50,000 sitting elsewhere, do I top up the $50,000 to UOB One?”

Firstly, congrats on having accumulated so much cash to be able to consider this option.

To answer this question, we can look at what are the alternative savings accounts we can consider. 

If we have S$100,000 in the UOB One account currently, it is very likely that we are already able to meet the salary deposit and credit card spend requirement to earn the effective interest rate of 5.0% p.a. currently.

In this case, the savings accounts that we can consider are the ones that offer a higher interest rate for meeting these requirements. 

Amongst the local banks, the OCBC 360 account offers an interest rate of up to 4.65% p.a. for our first S$100,000 of deposits when we credit our salary, save and spend. 

This means that we can earn up to S$4,650 of interest per year for a S$100,000 deposit into the OCBC 360 account if we meet the requirements. 

ocbc 360 account interest rate
Source: OCBC

We would be note that there is an additional requirement of increasing our average daily balance by at least S$500 monthly to earn this interest rate. 

Also, the interest rate of the OCBC 360 account falls to 0.05% p.a. for balances of above S$100,000. 

This means that we would have to find a savings account that offers a decent interest rate for our remaining S$50,000 of savings, that does not require us to jump through hoops like meeting the salary deposit requirement.

Based on our best savings accounts, the MariBank savings account allows us to earn an interest rate of 2.88% p.a. until 30 June 2024 in a fuss free way. 

This means that we can potentially earn another $1,440 of interest per year on our S$50,000 of savings. 

maribank savings account review sep 2023

Combining the OCBC 360 account and the MariBank savings account, we can earn S$6,090 of interest per year based on the current interest rates offered. 

This would be slightly higher than the S$6,000 of interest earned on the UOB One account for S$150,000 of savings. 

However, the disadvantage to this is that we would need to manage two separate accounts, and inform our HR department of the change in salary deposit.

Also, OCBC may also cuts their interest rates thereafter, even though it has said that there is no change in the interest rate on the OCBC 360 account for now

With the possibility that the interest rate on the OCBC 360 account may be cut, we would prefer to top up our UOB One account to S$150,000 if we have $50,000 of savings sitting elsewhere. 

We can also tap on the UOB ‘Big Savings Payout’ promo to maximise our rewards when we top up to the UOB One account. 

By topping up $50,000 of savings into the UOB One account and setting it aside for 4 months, we can earn a guaranteed cash credit of S$250. 

This would allow us to earn a higher total combined interest compared to the OCBC 360 + MariBank savings account combination without having to set up a new savings account.

However, as our deposits with the UOB One account would be above the deposit insurance limit of S$100,000, we would need to be comfortable with part of our deposits not being insured in pursuing such a strategy. 

Strategy for S$150,000 of savingsUOB OneOCBC 360 + Maribank combination
Interest earned per year based on announced rate from 1 May 2024
  • S$6,000
  • $6,250 including guaranteed cash credit from Big Savings Payout promotion
  • $6,090
Pros
  • Consolidated in one savings account
  • Combined effective interest rate of 4.06% p.a.
Cons
  • Deposits above $100,000 not covered by deposit insurance
  • Need to set up multiple accounts
  • Possibility that OCBC may cut its interest rates too
  • Need to meet OCBC 360’s additional requirement of increase in average balance of at least S$500 monthly

If we are looking to switch to the OCBC 360 account and pair it with another savings account, we can also consider the Stanchart eSaver account and HSBC Everyday Global Account (EGA).

However, the promotional interest rates offered by Stanchart eSaver and HSBC EGA are only for fresh funds and the promotional interest rate will only be earned in April and May. 

#2 – If we have $100,000 or less of savings 

The next question that many have asked if “What do we do if we do not have the additional S$50,000 of savings to top up to the UOB One account?

And I believe this applies to most of us who do not have S$150,000 of savings sitting around in bank accounts.

Once again, we would then consider whether it is worthwhile to switch to the OCBC 360 account

For all deposit amounts of S$100,000 and below, the OCBC 360 account offers a higher interest rate compared to the UOB One account. 

If we have S$100,000 of savings, we can earn an interest of S$4,650 per annum with the OCBC 360 account, S$1,270 more than the interest of $3,380 per annum earned on the UOB One account. 

If we have S$50,000 of savings, we can earn an interest of S$2,325 per annum with the OCBC 360 account, S$635 more than the interest of $1,690 per annum earned with the UOB One account. 

To help you decide, use the calculator below to compare how much interest you would get with the UOB One account and the OCBC 360 with the new interest rates.

 

The question then lies in whether this additional interest earned is worth our effort in switching to the OCBC 360 account. 

Firstly, there is always the likelihood that the interest on the OCBC 360 account may be lowered after we switch. 

Also, we will need to ensure that we can meet the additional requirement on the OCBC 360 account of increasing our average balance by at least $500 per month to earn the higher interest rate. 

Strategy for S$100,000 of savings or belowUOB OneOCBC 360 
Interest earned per year based on announced rate from 1 May 2024
  • Up to S$3,380
  • Up to $4,650
Pros
  • No switch required
  • Higher interest earned 
Cons
  • Lower interest earned
  • Possibility that OCBC may cut its interest rates too
  • Need to meet OCBC 360’s additional requirement of increase in average balance of at least S$500 monthly

We can also consider the Standard Chartered Bonus Saver account, but to earn an effective interest rate of above 3.0% p.a., we will need to spend more than S$2,000 monthly on our credit card with the interest rate cut from 1 May

Also, as the interest rate on no-frills savings account such as MariBank is still lower than the base interest rate of 3.0% per annum on the UOB One account, there is little reason to switch if we can meet the salary deposit and credit card spend requirements. 

Are there other options to consider to switch out of UOB One savings account?

Some have asked if it might then be worthwhile putting our money into fixed deposits or T-bills compared to the UOB One savings account. 

Firstly, we would only consider these options if we are not using these savings as emergency funds, as both fixed deposits and T-bills are less liquid compared to savings accounts. 

The best 3-month fixed deposit rate is currently at 3.35% p.a., which is lower than the highest effective interest rate of 4.0% p.a. offered by the UOB One account, but above the interest rate of 2.88% p.a. offered by MariBank.

Hence, we can use this as an option to pair with the OCBC 360 account, if we do not need so much emergency cash. 

We can also consider the 6-month T-bill, which has a cut-off yield of 3.8% in the recent auction on 27 March 2024. 

However, the yield on the T-bill may decline if there is a surge in applications. Already, we have seen a sharp increase in the demand for the T-bill, with the total applications reaching a record high of S$15.6 billion in the latest auction.

6 month singapore t-bill application 27 march

Lastly, we can also consider money market funds, which aim to provide higher potential returns compared to savings accounts.  

What would Beansprout do?

While we’d have liked the attractive interest rates on the UOB One account to be maintained for longer, all good things must come to an end. 

However, we would not be too hasty in switching savings account as yet, as the change in interest rates will only be effective from 1 May.

In fact, if we currently have S$100,000 in our UOB One account and another S$50,000 in other savings accounts, we may consider topping up the UOB One account to earn $6,000 of interest per year. 

To maximise our rewards, we would also tap on the UOB ‘Big Savings Payout’ promo for an additional guaranteed cash reward of S$250.

However, we would be mindful that part of our deposits will not be insured with this strategy. 

If we have less than S$100,000 in our UOB One Account or insufficient funds to top up, then we would consider switching to the OCBC 360 Account.

However, we would have to make the salary credit change, make sure we meet the requirement of having an increase in our average balance by at least $500 per month, and face the possibility that the interest rate on the OCBC 360 account may be lowered too. 

With the interest rates for more savings accounts likely to be adjusted in the coming weeks, we will be updating our guide to the best savings accounts in Singapore regularly as they get announced. 

Follow us on Telegram to receive updates when there are revisions to the savings accounts interest rates.

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2 comments


  • D.J.T. • 07 Apr 2024 02:42 AM
  • SS • 08 Apr 2024 12:06 AM