SINGAPORE – UOB is cutting the interest rates on its flagship savings account, the UOB One Account, citing expectations of falling rates over the longer term.

OCBC Bank and DBS Bank have indicated that there are no changes to their flagship savings accounts for now.

From May 1, UOB One customers with account balances of up to $100,000 will earn an annualised interest rate of between 3 per cent and 4.5 per cent if they fulfil two criteria – credit a monthly salary of at least $1,600, and spend in the same month a minimum of $500 on eligible debit and credit cards, such as the UOB One card and UOB One Visa debit card.

This is down from between 3.85 per cent and 7.8 per cent that customers are getting up until April 30.

A UOB spokesperson said the rate revision is to “align with longer-term interest rate expectations”.

The US Federal Reserve has been pondering interest rate cuts after jacking them up to a 23-year high – of 5.25 per cent to 5.5 per cent – after the Covid-19 pandemic to rein in high inflation.

The US central bank voted to keep interest rates unchanged at its latest meeting in March, but markets continue to expect three rate cuts – of 25 basis points each – this year, with the first one happening after the June 12 meeting.

From May 1, UOB will also introduce two new balance tiers that will allow account holders to earn higher total interest, but they must have balances above $100,000 and meet salary (at least $1,600) and spending (at least $500) criteria.

Balances between $100,000 and $125,000 will earn as much as 4.5 per cent, up from 0.05 per cent, while balances between $125,000 and $150,000 earn up to 6 per cent, also up from 0.05 per cent currently.

The spokesperson said that as at February 2024, “the number of UOB One Account holders with more than $100,000 deposited more than doubled from December 2022”.

Hence, these customers with bigger balances will be able to “enjoy attractive rates on their deposits”, the spokesperson added.

The three local banks raised their rates on savings deposits twice in 2022 as the competition for savers heated up amid the rising interest rate environment.

Among the three banks, UOB offered the highest rate on its UOB One Account of up to 7.8 per cent.

The bank noted that even after the revisions, UOB One Account holders will still “continue to enjoy competitive interest rates with the least requirements in the market”.

The interest rates on OCBC’s flagship 360 account went as high as 7.65 per cent, while DBS hiked the rates on its Multiplier account to 4.1 per cent.

OCBC has not announced any changes to its flagship 360 account as at April 1.

This means 360 customers continue to earn 4.65 per cent if they credit their salary, save and spend using the account; and as much as 7.65 per cent if they fulfil additional criteria to invest and buy insurance with the bank.

Ms Tan Siew Lee, OCBC’s head of group wealth management, said the bank “regularly reviews its product offerings – including promotional and product interest rates – to align them with the competitive landscape and market conditions”.

“We will strive to continue to offer our customers products and services that meet their savings and wealth accumulation needs,” she added.

Meanwhile, Mr Brandon Lam, head of deposits and financing solutions at DBS Consumer Banking Group, said the bank remains committed to helping customers make their savings work harder for them.

The DBS Multiplier continues to pay interest of up to 4.1 per cent per annum, while the POSB Save-As-You-Earn account gives as much as 3.5 per cent per annum.

DBS made some changes to its Multiplier account in August 2023 so that more savers can enjoy bonus interest rates from the bank.

It combined credit card and PayLah! retail spending, and lowered the eligible DBS/POSB transactions from $2,000 to $500 for the bonus rates.

Lab technician Dallas Goh, 32, who is a UOB customer, said he is reconsidering his options after news of the interest rate revisions.

He has money in the UOB One Account that is earning 3.85 per cent interest currently based on the criteria he fulfils. 

From May, this rate would fall to 3 per cent, so Mr Goh is considering if he should put his money into a money market fund yielding about 3.65 per cent.

However, Mr Elijah Lee, a senior financial services manager at Phillip Securities, said money market funds are not the same as savings deposits.

While they are liquid and impose no criteria to earn higher interest rates, Mr Lee said these funds are not protected under the Deposit Insurance Scheme, unlike savings deposits.

He added that if the criteria for bonus interest rates are still easily met, these flagship accounts may still remain viable for customers.