The DBS Multiplier Account has long been the darling of personal finance circles in Singapore. Among those of us who spend hours working out the best interest rate, it’s almost always come in at the top (among those who are new to this community, welcome – and we’re talking about “the one with the giant rabbit in the ad”.)
But recently, the DBS Multiplier account has been accused of becoming less awesome. Let’s look at why:
First, a quick look at what the original DBS Multiplier deal was:
To understand what we’re on about, here’s a quick rundown of the original deal.
DBS Multiplier a savings account that has a base interest rate of just 0.05 per cent per annum. But you can take certain multiplier actions, that will raise your interest rate. At the time, these were:
- Crediting your salary (only mandatory action)
- Credit card spend (charge things to your DBS credit cards)
- Getting your home loan from DBS
- Investing through DBS programmes, such as Invest-Saver (applies for first year only)
- Buying certain insurance policies from DBS (applies for first year only)
(Note: Using POSB counts too, the two banks are interrelated)
So long as your total transactions (across all actions) are $2,000 or above, you will get a bonus interest for each multiplier action. The total interest rate depends on the number of multiplier actions you take, as well as the amount of your total transactions.
In the past, people who took just three multiplier actions (e.g. credit their income, charge things to a DBS card, and use a DBS home loan), and had at least $2,500 in transactions, could easily earn an interest rate of around two per cent per annum:
As such, it was quite easy for the average Singaporean to earn a good absolute return, for banking actions they were going to take anyway.
One other thing: the interest is subject to a balance cap. This is the maximum amount on which the bonus interest rate will be applied (anything exceeding this amount generates only the base interest rate of 0.05 per cent).
The balance cap used to be as follows:
- Cap of $50,000 for salary credit + one other multiplier action
- Cap of $50,000 for salary credit + two other multiplier actions
- Cap of $100,000 for salary credit plus three other multiplier actions
Overall, this was one of the best deals in the market.
But then, DBS replaced “salary credit” with “income credit”, and the personal finance community raged
You see, back when the term was “salary credit”, crediting your pay cheque and getting dividends (through DBS investment schemes) counted as two multiplier actions.
Now that it’s been replaced with income, crediting your pay and your dividends would only count as a single multiplier action. On top of that, the balance cap has been changed. As of 1st February 2020, the cap is as follows:
- Cap of $25,000 for income credit + one other multiplier action
- Cap of $50,000 for income credit + two other multiplier actions
- Cap of $100,000 for income credit + three other multiplier actions
you previously credited your salary, dividends, and took a DBS home loan, your balance cap would be $50,000. But now that crediting salary and dividends count as one, you only count as taking two multiplier actions (income credit + DBS home loan). As such, your balance cap is halved from $50,000 to $25,000.
But the DBS Multiplier Account is still great for some people, such as the self-employed or retirees with dividend income
Prior to the big change, it was almost impossible for self-employed people to get the benefits of DBS Multiplier. Remember, crediting your salary was a mandatory action.
In fact, I should know. I’m self-employed. Apart from doing something rather pointless and drastic (e.g. setting up a company to pay themselves a salary), this option just wasn’t available.
Another group that benefit are retirees who don’t have a paycheque; they may be living solely on their CPF pay-outs, plus pay outs from their various stocks and bonds. They can now use the DBS Multiplier accounts as well.
Anyone getting just $2,500 per month is probably able to get the two per cent interest rate still; a much better deal than most banks offer.
“Hmmpf, well I’m an employee and it’s bad for me!”
Okay fair enough, you took a slight hit here.
But is it really that bad? Remember, the multiplier action from crediting your dividends or buying your insurance only applied for the first 12 months. That was always the case, so you were going to lose this as a multiplier action anyway.
If you’ve already used DBS Multiplier for more than a year, this shouldn’t be a big factor.
Anyway, it’s probably healthy that you don’t start betting too heavily on one banking product for your long-term plans
If your plans involving DBS Multiplier ended with “and then I will retire at 35”, well, sorry to disappoint you but it was improbable to begin with. Banks change their products all the time – it’s not uncommon for some products or services to be “sweetened” at the start, but change later.
It’s time to look at other investment opportunities that will make up for those few extra percentage points of lost interest; and with the range of options on the market – from REITs to ETFs to vanilla bonds – doing so shouldn’t be difficult.
Your portfolio will be more diversified, and you’ll be less reliant on hoarding all the money in one bank account.
This can be construed that the whole personal finance community raged, which may not be the case as we see some coming up to look for ways to invest or those who could not qualify are happy, as they now can through income category.