You will be able to list the conditions behind a promotional rate and decide whether you meet them.
Farah sees a banner on her bank's app: a fixed deposit at a rate well above anything else she has seen this month. She taps through, enters S$20,000 from her savings account at the same bank, and gets an error. The money does not qualify. Three paragraphs down the terms, she finds out why. The rate is only for fresh funds, and her money has been with the bank all along.
Promotional rates can be worth having. The headline number is the part the bank wants you to see, and the conditions that decide whether you actually get it sit further down the page. This lesson is about that further-down part.
The most common condition is fresh funds. It means money that was not already with the bank on a particular date, or that is newly transferred in from another bank. Each bank writes its own definition, and a common one compares your balance on the day you place the deposit with your balance on an earlier reference date, counting just the increase as fresh.
The bank runs a promotion to attract new deposits, so it has no wish to pay a higher rate on money it already holds. That is why the best rate is often at a bank you do not currently use, and why shuffling money between your own accounts at the same bank does nothing to make it qualify.
Read the exact definition before you move anything. Whether money you moved in last week counts as fresh depends entirely on where the reference date falls.
Most promotions come with limits on the amount. There is usually a minimum placement, and sometimes a maximum above which the promotional rate stops and the rest earns less or is refused. If you have S$15,000 and the minimum is S$20,000, the offer is not for you, however good the rate.
Then there is the tenor. Promotions often use terms like seven months or eleven months rather than six or twelve. That is not an accident. An odd tenor makes the offer harder to compare with other banks, and it means your money matures at a time when you may not be ready to decide what to do with it.
Here is a made-up example of why it matters. Offer A pays 3.2% a year for seven months. Offer B pays 2.9% a year for twelve months. Offer A has the higher headline rate, so put S$20,000 in each and compare what they pay over a full year.
Offer A earns S$20,000 times 3.2% times 7 over 12, which is about S$373.33 for the seven months. If it then renews at a board rate of 0.3% for the remaining five months, that adds S$20,000 times 0.3% times 5 over 12, which is S$25. The year's total is about S$398.33.
Offer B earns S$20,000 times 2.9%, which is S$580 for the year.
The lower headline rate wins by about S$182, because Offer A spends five months at a board rate. Offer A only wins if, at the end of seven months, you move the money somewhere that pays at least as well. Lesson 5.4 shows you how to put offers on the same term so this comparison is easy.
Some promotions are also online only, which is fine if you use internet banking, or branch only, which is not if you do not.
A growing number of offers ask for something else from you. You might need to credit your salary to the bank, spend a set amount on its credit card, buy an insurance or investment product, or hold a minimum balance in another account. Sometimes meeting them moves you to a higher tier of the rate rather than qualifying you for the rate itself.
These offers can still be worth it, but only if you would meet the condition anyway. Taking out a credit card you do not want, or buying an investment product to qualify for a deposit rate, turns a savings decision into something else. Count the cost of the condition next to the extra interest.
Every promotion ends. What happens next depends on the maturity instruction, which you met in lesson 5.1, How a fixed deposit works and what protects it. If the deposit renews automatically, it usually renews at the bank's board rate for that term, and board rates can be far below promotional ones.
So the renewal instruction is part of the offer. Either set it to pay the money out to your account at maturity, or put a reminder in your calendar a week before the maturity date so you can decide with fresh information. The second option lets you take a new promotion if one is running, at this bank or another.
When Farah went back to the offer with this in mind, she found five conditions: fresh funds, a minimum of S$20,000, a seven-month tenor, online placement only, and automatic renewal at the board rate. She could meet three, and that ruled the offer out for her. Pick a current offer from a bank's website and go through its terms the same way. Write down every condition, and mark whether you would meet it.
Take one current promotional offer from a bank's website and list every condition you would need to meet, marking any you do not.
Junxiong-WFG Organisation is an authorised representative of AIA Financial Advisers Private Limited (Reg. No. 201715016G).