Monday, October 24, 2016

Why I Will Not Be Using POSB Cashback Bonus (Because It is Lame)

POSB has just recently launched a new cashback programme called POSB Cashback Bonus. It claims that “it’s cashback with more kick. POSB Cashback Bonus gives you up to S$130 a month, for the banking that you do.”

Ok so let’s see how do you get that “up to S$130” a month? So I went to POSB’s Cashback Bonus’s landing page for that. How it works according to the page:

Well, sounds good. But which three among these five should I choose? How exactly do I calculate that? There are no mentions of any percentage or methodology of how you get to that desired cashback?

Ok, so there is a calculator. “Use our Calculator to uncover how much you can earn.”

You can plug in various numbers and it will tell you how much cashback you will earn. But it still doesn’t tell you how it get to those numbers.

So I went on to check the FAQs. And then the full terms and conditions. STILL NOTHING. There are no mentions of what are the percentages of rebate for each category. Of course I know I can reverse engineer by using the calculator, but then this kind of defeats the purpose right?

From the full TnCs: “We will accord you the Cashback based on your Eligible Transactions in each calendar month, subject to the applicable minimum transaction amount (if any) and monthly Cashback cap (“Cashback Cap”). Details of the Cashback rate, minimum amount requirements and Cashback Cap will be published on our website, which we may revise from time to time at our discretion and without prior notice.”

Yeah, at your discretion and of which I can’t find. (Would be glad for anyone to actually point out that I am wrong in this.)

Now that is really bugging me. 

Lack of transparency

If this isn’t a POSB page, I would be saying “RUN!! RUN!! RUN!!!” My red flags are all raised here. Always be aware of investment plans or financials schemes that promise you “up to whatever whatever” but never tell you exactly how you can get that.

To me, that’s not transparent at all, probably deceitful and borderline dishonest. Hey that’s just my personal opinion. But my rule of thumb to myself is to be aware and beware of schemes that sound overpromising because they usually are.

Now to be clear I am not saying that this is a scam. Because it’s POSB. But still, I am pretty disappointed.

Now to be clear that I am not targeting POSB unfairly, let’s check OCBC’s 360 account and UOB’s One account. As you can see, the percentage of rebates for each category is clearly stated.

So, I can easily compare it with other products and choose one that is the best suited for me. Transparency wise, OCBC 1, UOB 1, POSB 0.

Well, the only reason I can think of for you to hide your exact cashback percentages is because it is nowhere near as good as your competitors.


Well, I can also refer to Mothership’s article on this cashback programme, and since Mothership’s article was paid and sponsored by POSB, so I can only assume that the math is correct.

Here are the two examples provided by Mothership:

Scenario A: Early-Career Individual
Salary Credit: $3,000
Credit Card Spend: $1,000
Home Loan Instalments: $1,000
Insurance: $300
Investments: $300

Total Cashback: $9 + $3 + $30 + $9 + $9 = $60 / month = $720 / year

Scenario B: Mid-Career Individual
Salary Credit: $6,500
Credit Card Spend: $2,500
Home Loan Instalments: $1,000
Insurance: $500
Investments: $1,000

Total Cashback: $19.50 + $7.50 + $30 + $15 + $30 = $102 / month = $1,224 / year

In both cases, it seems like the rebate percentages (for now?) are:
Salary Credit: 0.3% (cap at $20, meaning take home pay of $6,666.67)
Credit Card Spend: 0.3% (cap at $20, meaning credit card spend of $6,666.67)
Home Loan Instalments: 3% (cap at $30, meaning monthly instalments of $1,000.00)
Insurance: 3% (cap at $30, meaning monthly insurance payment of $1,000.00)
Investments: 3% (cap at $30, meaning monthly investment amount of $1,000.00)

Ok this is simply lame

1) POSB’s salary crediting require minimum of $2,500 and cashback rate is 0.3%. OCBC’s salary crediting minimum if $2,000 and gives you 1.2%. So POSB has a higher requirement and yet only gives a quarter of the rebates? And you still need to do another two things before you get this 0.3%? Yawn.

2) OCBC offers 0.5% while POSB’s only 0.3%. But OCBC has a minimum spend requirement of $500 per month, while POSB’s minimum spend on the credit card is <unknown value>, so this is probably good for those who aren't in a habit of spending at least $500 on their credit card. 

3) Ok, getting 3% back from your monthly home loan instalments does seem like a good deal. But, it probably only makes sense if you have already getting your mortgage through DBS/POSB. For those who already have a home loan with other banks, you will have to calculate the difference in interest rates that you already have vs what DBS/POSB can give you, then the potential savings you might get from this cashback programme by switching to DBS/POSB, and also the cost required in switching / refinancing your home loan. Oh, and did I mention, they may have the discretion to change that cashback percentage anytime they want? So your true savings by moving your mortgage to them is most likely nowhere near 3%.

4) Pay your POSB/DBS insurance premiums and you get 3% cashback. But the catch is that it will only be recognised on the first 12 months of your purchase. And it is only valid for new plans purchased after signing up for the POSB Cashback Bonus, not existing insurance plans. First of all, I personally would not advise my friends to purchase insurance through banks. The best is still to purchase insurance through a financial advisor that you are sure you can trust, or purchase term insurance through a DIY platform. And, are you likely to purchase a new insurance plan each year? Otherwise, not quite realistic to make this one of the three items you need to maintain in order to enjoy the cashback.

5) Invest through POSB/DBS and you get 3% cashback. Same as point 4 above. Your investment amount will only be recognised on the first 12 months. Your existing investments don’t count – only new ones do. Are you going to buy a new investment plan through POSB each year? Well, at least for me, I don’t think I will be able to do this either. Also, within the choices available, I would perhaps only be attracted to POSB Invest-Saver, which allows me to buy into the Nikko AM Singapore STI ETF (SGX:G3B) or ABF SingaporeBond Index Fund (SGX:A35); but I will not be interested in buying a new mutual fund through its Unit Trust Regular Savings Plan every year.

Personally I already maintain a POSB Invest Saver plan with them but hey, this is not eligible! Since it is existing and not new. Ouch!

OCBC only gives you 1% for items (4) and (5) for 12 months, but at least it isn't conditional upon that for you to enjoy cashbacks from other categories. That is an important distinction to remember.

So, how am I going to pick three out of these five categories in order to enjoy “up to $130” cashback each month? Well, you tell me.

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