As mentioned in my brief update post, I was tasked to help with my mother’s retirement planning. Before I dig dipper into anything I thought it would be an intelligent choice to “park” the extra cash she has on hand first. After some digging, I found a few choices that are good without the need to earn an income. As many of us know, bank accounts typically provide high-interest rates only if you:
- spend via their credit cards, or
- deposit your income with them
Since my mother is semi-retired she would not be able to satisfy either condition. Hence the research. Now, the research findings.
I think this is of no surprise for anyone who is looking into high-interest rates accounts. Maxigain has been gaining popularity since it’s launch. The idea is you can get up to 80% of the 1-month SIBOR rate + 1.2% bonus interest. Which as of Aug 2018 is 1.208% (80% of 1.51%) + 1.2% = 2.408%. This is really attractive since the money is theoretically liquid and easily accessible without any risks involved.
But as always, there is a catch. For this case, a few catches
Step up bonus interest scheme
The 1.2% is a step up bonus. We can get up to 1.2%, but the rate starts at 0.0% and slowly steps up another 0.1% every month. This essentially means we only get the maximum interest rates 13 months after account opening. To “play cheat” a little, we can start the account near the end of the month to get the 0.1% in a few days. Lol.
Lower balance penalty
The bonus interest counter (12, for each 0.1%) resets if our lowest balance in the current month is lower than the lowest balance in the preceding month. Let’s give an illustration to understand this further.
As can be seen from the table above, the bonus interest counter in April is reset to 0 since there is a lower balance in April. Hope this helps clarify the restriction.
Note that if the counter is above 6 it will be reset to 6 instead of 0. The above image is taken from Citibank’s website.
There is both a minimum and maximum balance restriction to Maxigain. Well, the maximum is not a restriction on balance, rather a cap on the interest earned. The base interest rate (80% of SIBOR rate) will reduce to 0.05% for any balance above $150,000.
The minimum is a sneaky one. According to Citibank, “You need to maintain a daily end of day balance of at least S$10,000 in your Maxigain account to earn base interest”. They, however, fail to mention the Total Relationship Balance (TRB).
I extracted the above image from a PDF banking fee document from Citibank. For some reason
I Google can’t find anything about the TRB on the Citibank website which makes this so much more sneaky! Or maybe I am just a bad Googler. Even if the information is available, I can only find the repercussions, so to speak, of the TRB on a separate page! Shouldn’t this information be available at one glance?
If anyone is interested, the pages are 2 and 4 for the respective images.
ICBC is offering a whopping 1.85% for a 12 months tenure! This is one of the, if not the best you can get for 12 months without risk. Even Singapore Savings Bonds (SSB) is only offering 1.75% for the first year. And let’s be honest, there are more hoops for SSB unfortunately.
The catch, yes there is ALWAYS a catch with these banks! Is:
Only for e-banking
Though if you are reading this I think e-banking is not an issue at all. 😉
Money locked in
Yes, the money will be locked in for however long the tenure is, but if used in conjunction with Maxigain I think it is not a bad deal at all. You get 1.85% for the coming year and you just transfer whatever that is in this account to Maxigain after the tenure ends.
At $20,000 the minimum balance is pretty high for us average joes (or janes).
This is the simplest account in the list. It is relatively high in interest rates (1%) and there are no hoops to jump through. Unless you count the minimum deposit of $1,000.
Wait, where is the catch?!
If you compare to other accounts in the list this bank account is nothing much. But it is still something!
Maximum balance cap
So, conclusion, start a Maxigain at/near the end of the month and chuck $15,000. Place however much you are comfortable being locked up (minimum $20,000) in ICBC Fixed Deposit and the remaining in CIMB FastSaver.
And as always, do your own research!!