Revision of Terms and Conditions for Citi MaxiGain Account from 2 Dec 2019
By The Boy Who Procrastinates - November 30, 2019
It was with disappointment and dismay that I have received the letter from Citibank, notifying the upcoming changes to be made to their prized savings account. Following the recent change on 2 January, Citibank will be revising the terms and conditions on the Citi MaxiGain Account for the second time with effect from 2 December 2019.
This article aims to provide an overview of the upcoming changes and how the existing account holders may be affected by the revision. You may also wish to refer to the revised Terms & Conditions for more information.
Revision of Interest Rates for Citi MaxiGain Account from 2 Dec 2019
- The base interest rate will be revised to 50% of the 1-Month SIBOR.
The 1-month Singapore Dollar Interbank Offer Rate (SIBOR) forms the main component for the base interest rate. Now, with a 20% decline in the benchmark, the existing account holders will inevitably find their shares of the pie shrank substantially.
As of 29 November, the 1-month SIBOR as reflected on the ABS website is 1.73933%. To put it into perspective, a 20% decline in the benchmark equates to a 0.35% absolute decrease in the base interest rate, which is definitely a considerable adjustment!
- The bonus interest rate will be revised to step up of 0.05% each month, up to a maximum of 0.6%.
In absolute term, the maximum bonus interest rate that one can earn will be pared down by a whopping 0.6%! Talk about a drastic change with just a month's notice.
Overview of the Revision
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Even though the Jan 19 revision has been undesirable, the impact to the effective interest rate is less pronounced with a slight reduction of 0.17%.
Taking 1-month SIBOR to be 1.73933%, the real deal-breaker that proves to be detrimental to the interest of account holders, comes from the upcoming change with the effective interest rate taken a nosedive of close to 1%. As outlined above, the base interest rate and potential bonus interest rate was cut by 0.35% and 0.6% respectively.
SIBOR
After the Federal Reserve cut its benchmark interest rate for the third straight time this year, the SIBOR has too, taken a turn from its high of 1.8% — 1.9% and has been inching downwards as evidenced in the chart below.
Amid the slower global economic growth with economic outlook trending towards lower interest rate, Citibank has followed suit and lowered the rate on its savings accounts. Similarly, fixed deposit rates may have come down at some financial institutions.
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Comparison with other Active Savings Accounts
Once a dark horse that is able to offer competitive interest rates among the active savings accounts and without the need for salary crediting or credit card spending, the Citi MaxiGain Account has certainly fallen from grace with this upcoming revision.
UOB One Account still offers the best bang for the buck at 2.44% effective interest rate. This is followed closely by OCBC 360 Account at 2.43% but it comes with the need to sustain the cycle for Step-Up bonus. The BOC SmartSaver also packs a punch at 2.35% effective interest rate, with an additional 0.60% p.a. extra bonus interest for balance above $60,000.
I understand that many prefer Citi MaxiGain Account due to its relatively less onerous prerequisite to earn interest. Some may have been unable to fulfill the salary criterion for active savings accounts, putting them at a disadvantage.
For the self-employed or those who have credited their salaries elsewhere, the UOB One Account can be considered to be an alternative. Salary crediting is an optional requirement and can be substituted by the payment of 3 bills via GIRO to obtain competitive interest rate.
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I understand that many prefer Citi MaxiGain Account due to its relatively less onerous prerequisite to earn interest. Some may have been unable to fulfill the salary criterion for active savings accounts, putting them at a disadvantage.
For the self-employed or those who have credited their salaries elsewhere, the UOB One Account can be considered to be an alternative. Salary crediting is an optional requirement and can be substituted by the payment of 3 bills via GIRO to obtain competitive interest rate.
Comparison with other Passive Savings Accounts
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In its own league of passive savings accounts, the Citi MaxiGain Account still offers the highest interest rate at 1.47%. For those who seek to be released from the shackle of withdrawal restriction, the CIMB FastSaver Account offers a reasonable interest rate at 1.325%.
To tide through December, the Maybank iSAVvy Account currently offers a promotional rate of 2.1% on incremental balance until the end of year. As interest is credited on incremental balance, some may consider alternating funds between Maybank iSAVvy Account and Standard Chartered e$aver Savings Account which offers 1.75% interest rate until Jan 20.
Comparison with other Saving 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.
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- Singapore Savings Bonds: Using the data of the Dec 19 issue, the interest rates for Year 1 to 3 remain fairly constant at 1.56%. The minimum investment amount is $500 for each issue.
- Fixed Deposits: Maybank currently offers fixed deposits at one of the highest interest rate of 2%. However, this comes with a minimum deposit amount of $50,001 and a tenure of 24 months. For deposits with shorter terms, CIMB is advertising its promotional rate of 1.7% and 1.8% p.a. on a 3-months and 12-months SGD time deposits respectively 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 2019 dividend of $0.0262 and the recent price of $1.190 (as of 29 Nov), the dividend yield is approximately 2.20%. Kindly note that this is excluding any capital gain/loss due to price movement on the bourse.
- Stashaway Simple: Recently launched this month, the cash management portfolio invests equally in the LionGlobal SGD Money Market Fund and LionGlobal SGD Enhanced Liquidity Fund, both are funds that invest in short-term debt instruments. While the net returns is projected to be 1.9% with no minimum balance, investors should be informed that the returns is not guaranteed and may fluctuate in volatile economic conditions. As with other investment products, it is not totally risk free and there is possibility, albeit remote, of losses. Furthermore, the invested capital is not insured by SDIC. There are other factors to be considered and we would probably leave that to another post in its entirety.
Things to note if you are closing your Citi MaxiGain Account
With the potential interest rate that one can earn on the Citi MaxiGain Account dipping to a mere 1.47%, it is probable that we may witness an exodus of yield-hungry depositors seeking out greater returns on their cash.
So if you are looking to maximize the returns on your funds and would like to close your Citi MaxiGain Account as soon as possible, there are some areas that you should take note of.
- An account closure fee of $50 will be incurred if the account is closed within 6 months from date of opening.
- The account service fee of $15 will apply at the end of the month if the Total Relationship Balance falls below $15,000.
- Minimum balances of $70,000 and $1 are required to earn the base and bonus interest respectively.
- Even though the base interest is accrued daily, it will not be pro-rated if a minimum of $70,000 is not maintained in the account. Therefore, it is preferable to close the account at the start of a month after receiving interest for the previous month.
- For the transference of funds via FAST, it should be noted that there is a transaction limit of $50,000 and daily transaction limit of $100,000. For an account holder who has stashed $150,000 in his MaxiGain account, he has to make 3 FAST transfers over 2 days in order to transfer the funds elsewhere.
- Theoretically, an account holder should still receive bonus interest on the lowest balance in the preceding month (e.g. $150,000) even if he were to withdraw all his funds but $1 on 2nd December and close his account in January. This will equate to approximately $37. In any case, one can always leave $15 in the account for the incurrence of account service fee and prevent overdraft. However, I cannot say with certainty that it will work the way it should as I have yet to test it out myself. But of course, the most straightforward way is to transfer the funds out and close the account at the branch and not be penny wise, pound foolish.
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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.
