Earning 5% per annum on deposits

The economy had been so bad that recently Singapore banks now only gives 0.125%pa on normal savings account instead of previous 0.25%pa. That is a 50% cut as if deposit interest rates were not already pathetic enough.

If I have $6000 cash in my savings account, I would only earn $7.50 for a year. If I were to put in fixed deposits at current rate of 0.55%pa, I would earn $33 a year.

I'm going to talk about the card by Standard Chartered Bank, the Manhattan Platinum card. The good thing about this card is that it is giving 5% cash rebates for spendings from $3001 onwards, capped at $300.

Consider if I have $500 bills to pay per month, it will cost $6000 a year. Should I pay per month as usual, or should I pay in one short?

The answer is pay in one short $6000. I would swipe my Manhattan card one short to pay off the whole year of $500 bill per month, which amounts to exactly $6000 per year. Reason is simple, Manhatttan card gives me $300 cash rebates which is much more than the interest of $6000 in the bank savings account that can ever generate for me.

Many people keep a lot of money in savings account. So for the portion of $6000, do you want to earn $7.50 from it, or earn $300 from it?

This illustration that I had shown here is absolutely risk-free. Of course $6000 can be higher yielding than 5%pa if you put in investments, but there are risks.

Start charging your utility bills, telephone bills, internet bills, insurance premiums yearly with this Manhattan card before the 5% rebate promotion ends. Also if you are buying big ticket items like LCD TV and furniture, do not opt for interest free monthly instalment schemes.

If you are usually hard-up, having monthly negative cashflow, or you wouldn't have $6000 to spare in your savings account, all the above does not apply to you.