The two banks appointed managing agents for the Child Development Account (CDA) are offering attractive interest rates to lure depositors. POSB and United Overseas Bank (UOB) announced their interest rates yesterday for the accounts aimed at young children.
POSB is offering an interest rate of as much as 2 per cent for its POSB Smiley CDA account.
The rate applies for the five years the bank has the CDA contract. Mr Jeremy Soo, managing director of DBS' consumer banking group, said "over 12,000 parents have registered their interest to open an account with POSB" since it won the contract last year.
The interest rate of 2 per cent applies to a family's first and second child and for up to $12,000. For the third or fourth child, the rate applies up to a sum of $24,000. For the fifth child and beyond, the rate applies up to a sum of $36,000.
Beyond these respective maximum levels, the rate on the funds will be at 0.05 per cent.
UOB is offering rates of up to 2 per cent for CDA deposits.
This comes in the form of a 1.2 per cent promotional interest rate plus 0.5 per cent for the first $20,000 in the CDA account.
Balances above $20,000 will get an interest rate of 2 per cent, which is made up of 0.8 per cent plus a promotional interest rate of 1.2 per cent. Promotional interest rates apply till the end of the year.
Mr Dennis Khoo, UOB's head of personal financial services, said that "we take a long-term approach to deepening our relationship with young families, and by not having a cap on the higher interest rates earned for CDA deposits, parents can use the interest to offset their child's education, medical and miscellaneous expenses over a longer period of time".
DBS customer Keith Tham, 30, said he will switch his daughter's current CDA account to POSB once the online portal by the Ministry of Social and Family Development opens next week. Mr Tham's daughter, Chloe, was the first baby born on Jan 1. Accounts can also be opened at any POSB branch from next week.