Earn more than 4.5% p.a. effective interest rate with CASA promo & GIA-i

In this post, I will show you how you how to earn more than 4.5% p.a. effective interest rate for RM10,000 for 4 months which is better than any of the FD promotions available now.

It requires some work on your part to maximize the return. I admit it is quite a hassle to get the maximum interest from this. If you are the type of person who hates complicated stuff & do not wish to waste time to get some extra interest, then I suggest you stop reading now. If you don't mind going through some trouble to earn more interest, please read on to find out how to achieve that.

In order to get more than 4.5% interest, we need to combine Hong Leong Doubling Interest Rates Promotion with Maybank's General Investment Account-i (GIA-i).

Current Account + GIA-i Combo

Accounts involved:
1) Hong Leong Pay & Save Account (P&S) (eligible for protection by PIDM)
2) Maybank's General Investment Account-i (GIA-i) (NOT eligible for protection by PIDM, interest & principal NOT guaranteed)

Promotion: Hong Leong Doubling Interest Rates Promotion

Promotion Period Until: 30 June 2016

Fund: RM10,000

Tenure: 4 months

Effective Interest Rate: > 4.5% p.a.


In my earlier blog post, I have written about the Hong Leong Doubling Interest Rates Promotion. Read it first if you have not to get a better understanding on how the promotion works. Otherwise, you would not be able to understand how this works. You also need to have an understanding of General Investment Account-i (GIA-i) to understand how it works & the risks involved. If you do not find the Hong Leong promotion too confusing or too much hassle and you are comfortable with the risks involved with GIA-i, then let's continue.

If you have RM10K with you now, instead of putting it into FD, you can split the money into P&S (Hong Leong promotion) & Maybank's GIA-i. The reason you need to split the money up is because the bonus interest rate for HLB promotion only applies to a maximum of 2.5K fresh fund per month. So the balance of 7.5K needs to go somewhere else if you want to maximize the interest.

Start by depositing 2.5K into your P&S account and the balance 7.5K into GIA-i. In the beginning of next month, withdraw 2.5K from GIA-i & deposit into P&S. Repeat monthly until you have 10K in your P&S account. You can do this online if you have online banking accounts with both banks. Refer to the table below for the balance in P&S and GIA-i respectively for the different months.

Then, perform 15x online IBG each month (for 4 months) to get the maximum e-Xtra interest rate of 1.9%.

The table below shows the interest you will get from both the P&S account (during promotion) and GIA-i account and the effective interest rate assuming you register in April. For simplicity sake, the interest is not compounded and the balance is assumed to be 0 on 31/3/2016. For your information, the bonus interest for the promotion is only credited a few months later. The interest for P&S follows its normal crediting cycle while for GIA-i, the interest is credited monthly.

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As you can see from the table, the effective interest rate is 4.51%. If you take compounding interest into account, the effective interest rate is slightly higher at 4.52%.



Taking it further

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You can take it further by swiping your debit card (min RM30 per swipe) for 5 times a month every month (for 4 months) to get extra 0.6% interest. Refer to the table above. The effective interest rate would then become 4.88%. If compounded, it would be close to 4.9%.

Personally, I think it is too much hassle to get the extra Debit Card bonus interest. If you have an existing credit card with cashback / rebate, you would need to calculate the difference between the extra interest & the rebate lost by using the debit card to see if it is worth the effort. You would also need to adjust the amount you need to deposit each month to take into consideration the amount you are going to need for your debit card spending. Then calculate the IAB accordingly.


Alternatives

If you are not comfortable with GIA-i's risks, you can substitute it with a 1-month Fixed Deposit (FD) or other Current Account / Savings Account (CASA). Of course, the effective rate would be lower since FD & CASA offer lower interest rate compared to GIA-i. FD is less flexible than GIA-i as you need to complete the entire 1-month tenure to get the interest or else you will not get any interest at all. So, you need to be aware of the placement date & maturity date and make sure it coincides with the beginning of the month. CASA is the most flexible but the interest rate is usually the lowest.