Your Money or Your Interest? – Banks Introduce Security Feature With a Catch

Three major banks – DBS, UOB and OCBC – are introducing optional security measures for deposit customers to lock up their money to guard against scams and hackers. The general idea is for people to be able to mark sums of money that can’t be transferred digitally. Instead, such funds can only be moved when the owner is physically at a bank branch.

As much as this seems like a relatively laughable regression from our efforts to go digital, I have to admit I quite like the idea. There are funds that we will likely not touch aside for emergency use and we can get some peace of mind by ensuring that such amounts can’t be easily transferred by hackers or scammers. As an added bonus, those who are more ill-disciplined in their finances may even find these new features a useful way to protect their own money from themselves.

The devil’s in the details though and here’s the catch for enhanced security: all but one of the banks’ solutions offer disappointing interest rates.

Not good: around 1.8% p.a. for DBS digiVault

DBS is introducing digiVault which is essentially a DBS My Account… and that gives an impressively low 0.05% p.a. interest rate. I thought I was a decimal place or so off but yeap, the interest rate is as good as 0.

There is also a bonus 1.8% p.a. interest rate which still puts the effective rate at under 2% p.a. Given how you can get 3.5% p.a. interest pretty easily with some banking accounts or cash funds, it’s really not great.

Worse, the promotional rate is only until 29th February 2024 and capped at the first S$50,000 of savings placed in digiVault. I imagine that someone using this feature would normally lock away funds for a relatively long period of time and it might be one’s life savings, so a few months of subpar interest rate and on a relatively low amount makes this a raw deal for customers.

If you wish to apply, DBS has been rolling it out progressively from 7th December 2023 onwards. After placing money into this account, you can only withdraw your funds by verifying your identity at a DBS or POSB branch.

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Mediocre: around 2.45% to 2.92% with UOB LockAway

UOB LockAway is offering “up to 5% p.a. interest”. In usual UOB fashion, the interest rate quoted is based on the highest rate given on a tiered basis:

Account BalanceInterest Rate (p.a.)
Until 31st March 2024
Interest Rate (p.a.)
1st April 2024 onwards
First S$20,0001.00%0.05%
Next S$40,0002.50%1.50%
Next S$40,0003.00%3.00%
Next S$25,0005.00%5.00%
Above S$125,0000.05%0.05%

Until 31st March 2024, the effective rate is 2.92% p.a. for a S$125,000 balance. Because the interest rate is “top-heavy” – i.e. the rates are highest for amounts between S$100,000 to S$125,000 – your effective rate is lower for every dollar lower than S$125,000. A balance of S$60,000, for instance, only gets 2% p.a. effective rate while a S$100,000 balance gets 2.4% p.a.

From 1st April 2024, the rates are even lower. A S$125,000 balance will only get 2.45% p.a. interest.

If you wish to apply, you may do so at UOB’s website for the account. After placing money into this account, you can only withdraw your funds by verifying your identity at a UOB branch.

Good: OCBC Money Lock gives the account’s usual interest

Instead of making new accounts like UOB and DBS, OCBC does something I find entirely logical and consumer-friendly. One can simply earmark funds within their existing OCBC account and those funds will be locked but still contribute to the account’s interest.

For example, if you have funds in your OCBC 360 account earning 4.65% p.a. interest, you can simply lock up however much you want in multiples of S$10. There is no change to how much interest you will get, just that these sums will not be usable or transferrable until you unlock them at an OCBC branch or ATM.

If you wish to lock your funds up, you can do so within the OCBC app. After locking up your funds, you can only unlock your funds at an OCBC branch.

Extra points to OCBC for also allowing certain ATMs to unlock funds. Given the kinds of queues we see at bank branches these days, this is another feature that makes OCBC’s implementation much better than the rest.

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Security should not come at the expense of interest

While such features are welcomed, the security should not come at the expense of one’s interest. We should hence applaud OCBC as the only bank so far which allows you to get the usual higher interest rates of accounts like OCBC 360 while still allowing you to lock your funds.

In this regard, it is particularly curious how UOB has not done the same. After all, UOB has frequently offered “earmarking promos” where funds are locked up in an account but still generates the usual interest. The mechanism is already in place, so UOB (and other banks) should also extend this locking mechanism outside of promotional periods like OCBC has done.

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