[UPDATE] OCBC has updated their rates in March it's no longer attractive.
In Short, T bills are more attractive now but no one knows if that will stay the same as all the demand will shift over here. To learn how to apply for Tbills using CPF OA online, refer to this link
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So OCBC has launched a promotion fixed deposit of 3.88% p.a. over 8 months for CPF OA.
Many bloggers have covered this, should I still cover this? Absolutely….
That said, I’ll be kinda screwed if the promotion ends 28th February
Please don’t do this to me….. XD
The 3 options I'll compare are:
- CPF OA’s 2.5%
- MAS Treasury bills (T bills)
- OCBC’s Fixed deposit of 3.88% p.a.
Given that US interest rates are still rising, I’m of the view that the situation in 2nd half of 2023 might change and I’m biased towards higher rates.
At the same time, I don’t want to only earn 2.5% as I wait.
CPF OA vs MAS 6-Month Treasury bills
So we know that CPF takes the lowest account balances of the previous month to accrued interest.
That means, if I were to switch over to 6 Month T Bills, my interest rate at a minimum will be 2.92%.
Another consideration is that I need to submit my bid at least 1 working day before 12 noon.
This also means that the debit of CPF OA will definitely take place first.
In addition, if this is the last issue of the month, I’ll have to take up a non-competitive bid as I’ve already lost interest this month.
That said, given the last yield of 3.93%, I guess that wouldn’t be an issue.
But how does this match up against OCBC?
MAS 6-Month Treasury bills vs OCBC’s 3.88%
To match the timeframe of both products, I’ll compare 6M Tbills +2 Mth CPF OA VS OCBC 3.88%.
Let’s consider a deposit of $100K.
For OCBC – 8 months = 243 days. The interest earned is $2,583.12
For CPF OA – a 2-month Interest will be $416.67.
So the T Bills need to give me a return of $2.166.45 over 6 Months which implies a yield of 4.34%.
This is required to compensate for the lower interest rate from CPF OA.
I do believe T bills will hit this rate one day but the question is when?
Ok… but is it really worth it?
Given that the first 20k cannot be used (no biggie as it's already earning +1%), I might also want to keep some (35% for stocks).
So how much can I really use?
Assuming a deposit of $100K, the additional interest you get is $708.12 assuming 243 Days calculation.
Each additional $1K deposit will give you an additional $7.08
The application can only be done at the branch which is an ordeal itself, but there are ways to beat the queue.
Use the easy q option in OCBC’s app. it's free for all.
i.e. there is no need to be an existing OCBC customer.
But do note that if the 6 people ahead of me vanish, I'll be forced to “teleport”.
Does the timing of the deposit matter?
**Sidenote: I need to manually instruct the bank to transfer the money back to CPF OA, or else it will be only transferred 2 months later. **
But it really depends on the game plan at maturity.
If I can roll the sum over to the fixed deposit or T-Bills, then it's not going to be an issue.
That said, doing it at the start of the month is the most prudent to provide a sufficient buffer.
Aftermath?
On Day 0, I submitted the application
Day 1, I see that it’s reflected in my CPF IS as pending
Day 2: I’ve received the debit SMS from CPF and it’s reflected in OCBC's app.
** This is my personal opinion and not financial advice. Definitely not a sponsored post**
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