Revision of Terms and Conditions for Citi MaxiGain Account

By The Boy Who Procrastinates - December 08, 2018


Citibank has officially announced that there will be revision made to the Citi MaxiGain Account from 2 Jan 2019, finally putting the rumour on upcoming changes to rest. Launched in Feb 2016, this will be the first time that Citibank will be revising the terms for this passive savings account. 

This article aims to provide an overview of the upcoming changes and whether the existing account holders stand to benefit from the revision. You may also wish to refer to the revised Terms & Conditions and FAQ for more information. 


Summary of the Current Interest Rate Mechanism for Citi MaxiGain Account

Before examining the upcoming revision to the Citi MaxiGain Account, it is probably beneficial to have a good understanding and recap of its current interest rate mechanism. For ease of reference, I will briefly summarize on how an account holder can earn interest with this unique savings account. 

  • Base Interest Rate: Equivalent to 80% of the 1-month Singapore Dollar Interbank Offer Rate ("SIBOR"). It fluctuates daily in accordance to the movement of the aforementioned rate. You can find out more about the latest SIBOR on the ABS website.
    In order to earn the base interest rate, a daily end-of-day balance of at least $10,000 is required to be maintained in the account. The maximum account balance that earns the base interest rate is capped at the first $150,000. 
  • Bonus Interest Rate: It operates via a counter mechanism which will increase the bonus interest rate by 0.1% along with each step up to a maximum of 1.2%. The counter starts at 0 and will raise by 1 each month provided that the lowest balance in a month is equal to or greater than the lowest balance in the previous month.
    At the end of the month, the account holder will receive the e-statement for the Citi MaxiGain Account which indicates the current counter accumulated.
    There is no minimum or maximum balance requirement to earn the bonus interest rate as long as the aforementioned criterion is fulfilled. 
Current interest rate mechanism for Citi MaxiGain Account

Therefore, the total interest rate an account holder can expect to earn on the Citi MaxiGain Account is the sum of the base interest rate and bonus interest rate. For further insight, you may wish to refer to my previous post here.

In addition, it is prudent to take note of the onerous prerequisite imposed on Citibank products to maintain at least $15,000 to fulfill the minimum total relationship balance ("TRB"). Should the TRB falls below the stipulated amount, an account service fee of $15 will be charged. 


Revision of Interest Rates for Citi MaxiGain Account from 2 Jan 2019

  • The base interest rate will be revised to 70% of the 1-month SIBOR. 
This is definitely an undesirable change with a 10% decline in the benchmark pegged to the 1-month SIBOR which forms the main component for the base interest rate. 

As of 8 December 2018, the 1-month SIBOR as reflected on the ABS website is 1.64125%. To put it into perspective, a 10% decline in the benchmark equates to a 0.16% decrease in the base interest rate. This margin tends to widen along with the rise in SIBOR.

Since the start of the year, the SIBOR has been picking up gradually from 1.33% to the current 1.64%. From Citibank's stance, it may be conceivable to take measures in order to tackle the creeping SIBOR. 

  • In order to earn the base interest, a daily end-of-day balance of at least $70,000 must be maintained. 
This is yet another unappealing change to the savings account. The barrier to earn base interest would be raised by a whopping 600% to $70,000! Such significant jump would definitely catch many account holders (including myself) off guard. 

In my opinion, this is probably the most distasteful modification among the three. Given the rise in SIBOR, the base interest rate has the potential to go higher and therefore carries a heavier weightage of the total interest rate. However, it would definitely be challenging for an average account holder to put in another $55,000 on top of the TRB before he can ride on the upturn in SIBOR. 

  • Bonus Interest Rate will be capped at $150,000 balance.
Even though limiting the maximum balance amount that earns the bonus interest is viewed as an unpleasant alteration, the adverse impact is likely to be less pronounced as compared to the 2 other areas of revision as highlighted above. To clarify, there is no minimum balance requirement to earn bonus interest.

Taking the Crazy Rich Asians out of the equation, it is probably safe to consider the amassing of $150,000 savings an arduous task. Furthermore, with the availability of alternate instruments offering attractive rate, earning a maximum interest rate of 1.25% (in the context of current mechanism) for balance beyond $150,000 is definitely not putting money to work hard enough for you. As such, I am rather indifferent to this area of change. Meh.


Revised interest rate mechanism for Citi MaxiGain Account


Overview of the Revision


The table summarizes the 3 areas of alteration made to the savings account. All in all, it is apparent that all three changes are unwelcome and would be detrimental to the interests of the account holders. 

Taking the 1-month SIBOR to be 1.64125%, the revised base interest rate is calculated to be approximately 1.15%. The bonus interest rate can stretch from 0% (Month 1) to 1.2% (Month 13). Altogether, the total interest rate falls within the range of 1.15% to 2.35%, assuming that the minimum daily balance of $70,000 balance is maintained in the account and that the SIBOR remains constant throughout the 13 months. 

At maximum counter, the base interest can take up quite a considerable portion (48.9%) of the total interest. However, the barrier to earn it has raised significantly, making it almost out of reach for the average account holders who do not have $70,000 balance in their accounts. 

Alternatively, new account holders may consider depositing the TRB of $15,000 to raise the counter. The remaining $55,000 can be topped up at a later stage when the bonus interest derived from the counter becomes sufficiently significant. Even though he may lose out on the base interest during those months, I would suppose that this would be a better allocation of funds as the total interest rate would be relatively unattractive during the process of building up the counter. 


SIBOR


Previously, we have established that the SIBOR moves in tandem with the US Fed Fund Rate. After staying depressed since 2009, both rates have begun to pick up from 2015 onward. The Fed has recently pointed toward the strong likelihood of another quarter-point adjustment in the central bank's benchmark rate target in Dec and the FOMC is likely to approve three more hikes in 2019. In the near term, I would expect the SIBOR to rise further. 


Withdrawal of Interest without Resetting the Counter

Even though there is certain restriction imposed when it comes to the withdrawal of funds from Citi MaxiGain Account, an account holder can still draw out the interest credited without resetting the counter. This is because the bonus interest is awarded via a counter system that is based on the lowest balance in a month. 

For example, an account holder has amassed a balance of $150,000 at the start of the month and has decided to withdraw the excess interest which earns a paltry 0.05% interest rate. At the end of the month, the base and bonus interest is credited to the account but the lowest balance of the month remains at $150,000.

Lowest Balance in Month 1: $150,000

The account holder then withdraws the interest at the start of the following month, leaving the balance of $150,000 untouched. 

Lowest Balance in Month 2: $150,000

As the lowest balance in Month 1 is equal to the lowest balance in Month 2, the Counter will raise by 1. If the Counter has already reached the maximum count, it will not reset. 


Comparison with other Passive Savings Accounts


Assuming that the SIBOR remains constant throughout the 13 months, the Citi MaxiGain Account can reach up to an effective interest rate of 2.35% at its full potential. This is almost thrice that of its passive savings account peer, CIMB FastSaver Account (0.886%) at the second placing. 

Even if you are not inclined to maintain $70,000 and would prefer to earn simply the bonus interest, the Citi MaxiGain Account still continues to outshine its passive peers easily with an interest rate of 1.2% (after Month 13). 

However, Citi MaxiGain Account has certain drawbacks which are mainly attributed to the imposition of withdrawal restriction and high TRB barrier. Additionally, it would take at least a year to reach Counter 12. 


Comparison with other Active Savings Accounts


Even if we were to place Citi MaxiGain Account in a different league, the high interest rate it provides at its full potential is still startlingly comparable to that of the other active savings accounts, despite of the upcoming revision to its base interest rate. 

Maybank SaveUp Account still offers the best bang for the buck at 3% effective interest rate, with a rather taxing requirement of at least $300 GIRO payment or the qualification of any of the other 6 products/services. UOB One Account still retains the runner-up position at 2.44%. 

Contending for the bronze medal are Citi MaxiGain Account (2.35%) and OCBC 360 Account (2.30%). That is to say, if an account holder has an idling sum of $70,000 and wishes to perform neither salary crediting nor credit card spending, he may choose to deposit it in Citi MaxiGain Account and earn higher interest than if he were to place in OCBC 360 Account. 


Comparison with other Savings Instruments


Running the risk of having an over-simplistic comparison, I have picked a few other conservative financial products to have a general idea of the yields across various instruments. To realise the potential of Citi MaxiGain Account, the timeline is assumed to fast forward to 13 months onward while the yields of other instruments are presumed to remain constant. 

  • Singapore Savings Bonds: Using the data from the Jan 19 issue, the interest rate for Year 2 is reflected as 2.14%. The minimum investment amount is $500 for each issue. 
  • Fixed Deposit: One of the fixed deposits that currently offers the highest interest rate is by CIMB Bank. Its promotional rate of 1.9% p.a. on a 12-months SGD Time Deposit comes with a minimum placement of $10,000.
  • ABF Singapore Bond Index Fund: The ETF invests in the constituents of the iBoxx ABF Singapore Bond Index which tracks a basket of high-quality bonds issued primarily by the Singapore government and quasi-Singapore government entities. Based on its declared 2018 dividend of $0.0261 and the recent price of $1.143 (as of 8 Dec), the dividend yield is approximately 2.28%. Kindly note that this is excluding any capital gain/loss due to price movement on the bourse. 
Graphically, the Citi MaxiGain Account tops the chart with the potential interest rate of 2.35%. Following closely, the dividend yield of 2.28% offered by ABF Singapore Bond Index Fund is relatively attractive as well. However, it is vital to note that the returns on the passive savings account and ETF may be subjected to fluctuation in the SIBOR and market pricing respectively.

In Year 2, the Singapore Savings Bonds offers an interest rate of 2.14% which lagged behind that of the other 2 products. Relying on the information from Jan 19 issue, the average interest rate per year will reach 2.37% in Year 8 due to the employment of step-up mechanism 
for its coupon rates.

Despite the revision to its base interest rate, it appears that the total interest rate potentially offered by Citi MaxiGain Account is still relatively competitive. However, in the recent period when many financial institutions are dangling higher interest rate and vying for funds before the interest rates rise further, Citibank may be treading on thin ice with its decision to revise the terms of Citi MaxiGain Account. Whilst the reduction in the benchmark pegged to the 1-month SIBOR, coupled with more demanding hurdle to earn interest might help the bank to lock up substantial funds, this strategy can be risky and might backfire, especially with the increasing payout offered by alternate instruments which does not impose a significant minimum balance requirement. 

Having said that, I am currently on Counter 7 and will likely hang on to the account for the time being given SIBOR upward trend in the near term. In the meantime, I am keeping my options open. 


Point of concern

If there has not been any user-initiated transactions (e.g. withdrawal, deposit) for the past 6 months, Citibank will render the account inactive. 

Once the account is classified so, the account holder is unable to carry out transactions on the account. The base and bonus interest should still be credited to the inactive account. 

To reactivate the account, the account holder can call the hotline and reach out to the customer service officers for assistance. 

Other than withdrawing the interest at the start of the month, another hassle-free method to prevent the account from inactivity is to set up a standing instruction to transfer $1 into the account on a monthly/quarterly basis


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Disclaimer: Kindly note that this is not a sponsored post. The author is in no way affiliated with the stated financial institution and does not receive any form of remuneration for this post. The Boy who Procrastinates has compiled the information for his own reference, with the hope that it will benefit others as well.

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2 comments

  1. Given that you are at counter 7 (base 1.15% + bonus 0.7% = 1.85%), will you be topping up the difference to hit $70K or wait for the counter to move up further before doing the top up? It still pales in comparison to alternative instruments like SSB (2.01% for 1st year) with a minimum of just $500 compared to $70K

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    Replies
    1. Hi Joan,

      My takeaway from the recent rate hikes by the Fed is that there is potential for SIBOR to climb further in 2019. As such, I will be keeping the Citi MaxiGain Account active and will maintain at least the TRB of $15k to raise the counter.

      At Counter 7, the total interest rate potentially adds up 1.85%. With just 2 counters away for it to exceed the Year 1 interest rate of 2.01% offered by SSB, I would probably save the hassle of using the funds to apply for SSB and redeem it 2 months later to transfer to the savings account. As such, I might be topping up the difference.

      For a start, I would recommend focusing on active savings accounts since we can unlock relatively high interest rate without having to wait for a year. The excess can then be placed in passive savings accounts / SSB. It is vital to note that there is opportunity cost incurred for the 15k deposited to raise the counter given the low bonus interest rate at the initial stage.

      However, for someone with an idle sum of $70k (assuming that he has no intention of investing it and already maxing out the balance of active savings account) and has set up the account recently, I would think that it is reasonable to split $15k to raise the counter and the remaining in SSB. Once the bonus interest derived from the counter becomes sufficiently significant, he may consider consolidating it depending on the trend of SIBOR, as well as the availability of alternate instruments at that point of time.

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