Saturday, December 22, 2007

Interest on credit limit balance!

In the previous post I have mentioned on how you can utilise DBS credit card to pay for share purchases. But if you don't make any purchase and choose to transfer your credit limit balance, I will show you how much interest you can earn from the amount transferred.

For example a conservative annualised returns of 2% for phillip money market fund and $5000 credit limit balance that you have, if you were to put all the balance into POEMS cash management account which invests in phillip mmf, your interest for 20 days will be $5.43. You can use the formula below to calculate the interest (or returns) and by solving the equation. For more information you can refer to the Fatpitchfinancials link on the right.

APY or IRR = [(Final return/Initial investment)^(365/days) ] - 1

Hey that’s an easy and decent amount to collect just for 20 days right? It is better than nothing. Of course the amount will depend on your credit card usage and limit that you have. Personally I charge only about $50 a month under POSB everyday credit card to pay for my Starhub bills. So I have the remaining limit to plonk into POEMS cash management account.

26 comments:

Dumbo said...

so what's yr point in this?!

People have been plonking in POEMS MMF for years now.

and if you are a bit risk taking, maybe even Singapura Finance interests may be better.

Verbatin said...

Hi Mike,

the only way to put my excess money into philips money fund is to open a POEMS account with Phillip securities?

any other way to put money in Philps money fund?

Thanks

Mike Dirnt said...

Hi Verbatin,

Do you have any other cash management account like FSM cash fund? you can transfer there also? Does DMG got a cash management thingy also? Actually this cash management thing is a good temporary place for parking one's money before buying stock. Many investor park money there at the same time earn higher interest. its good to open a poems account as a sake of diverisification also. And for 4 months already, i put my DBS credit balance in POEMS mmf.

Verbatin said...

i have fundsupermart account but hv never thought of putting it into FSM cash account

i am not sure DMG has their cash mgt account or not.

Now that i know i can make use of my DBS card credit limit to earn interest, I may do it in future

Mike Dirnt said...

you can start transfer your balance on your fsm cash fund. i doubt DMG got cash management account. if have also the interest is not that good

Verbatin said...

i have applied for a poems account. seem that the interest from phillip money fund is higher than FSM.

Anonymous said...

hey mike - good tip there.

lemme pick your brain a bit - any other credit cards in Singapore can do this? I'm much more interested in accruing reward points from the credit card.

DBS ones doesn't give out reward points for online bill payment, installment plans, etc.

any ideas?

Verbatin said...

reward point is not as good as cashback. for every $1,000 spent, reward point is only around 0.3%.
and there is expiry for reward point and sometimes u force yourself to get something which u didnt want to

i'll take cashback anytime

Mike Dirnt said...

any other cc can do this and earn rewards you mean? No there isn't. The "interest free" cash advance is already good enough.

like verbatin mentioned, i prefer to receive cash rebates than redeeming rewards. as to the value of the rewards, maybe some rewards are good like the kris flyers, but useful if you are a frequent flyer. i had rather receive cash rebates as i can have control on what to spend.

Francesca said...

Hi Mike, from your post I understand that all cash in POEMS cash management account will be invested in the MMF.

Is this similar as you investing your cash in FSM, ifast cash acount MMF?

Thanks!

Mike Dirnt said...

yes francesca. they are similar. i prefer poems cash management to fsm cash fund.

poems cash management is very liquid. if you trigger a sell before 10am(if im not wrong), you will see the money in the afternoon

Francesca said...

Thanks Mike that was a fast response!

When you said trigger a sell, what kind of charges will there be (if any)?

Sorry for the novice question :P

Mike Dirnt said...

sell means selling your mmf units. in other words it is the same like withdrawal :)

Francesca said...

Thanks Mike! So I assume there's no charges for withdrawal of any amount in the cash management.

Mike Dirnt said...

Definitely no charges. if not it is not right to leave it there as most people leave their emergency funds in the mmf.

kurt said...

Hi Mike, i'm very new to this.
I have just started to look into the options of saving my money into MMF to make it grow.
Read about your DBS stuff, i own 3 cards from them, everyday, live, and their Amex version. How do i pick from them?
Kindly advise...

Mike Dirnt said...

Hi Kurt,

you can use any of the card. for consistency, i use the everyday card every month.

any card is ok because as long you use the limit of your DBS/POSB, all the credit card limit will be affected

sills said...

hey Mike,

Even though you transfer the credit limit of your credit card, you still have to pay off over the next 6 months (interest free period) right?

Isn't it the same as transfer part of your salary to MMF? Well.. perhaps salary might not be more than the credit limit..

Mike Dirnt said...

hey sills,

its not interest free for 6 months. its only interest free for 1 month :P

salary is your own money. credit is given to you extra. if you utilise it, you earn some money. you dont utilise it, you dont earn anything.

sills said...

oh.. i thought is 6 months 0% interest free with processing fee 1.5%, e.g.: UOB (http://www.uobgroup.com/pages/promotions/promo_cardsft.html)

anyway, you still have to repay the credit you transferred right?

Isn't it not worth it if the credit interest you have to repay is less than the interest you can generate from MMF in a month using the balance transfer?

sills said...

sorry some amendment..

Isn't it not worth it if the credit interest you have to repay is more than the interest you can generate from MMF in a month using the balance transfer?

Mike Dirnt said...

hi sills,

pls read the post carefully. there is no interest charges. if there is interest, there is no incentive of doing it.

yes you need to pay back the credit. it is good enough for a 1 month loan free of interest charges.

sills said...

Hi Mike,

Even there's no interest charges, there is always processing fee / administration fee / whatever you call that up front.

Please show me some websites from banks that do not require that.

Need help to improve your A Level H1/H2, Physics grades? said...

Hi Mike,

I love your blog..its practical!.

This is a great tip. Is it only DBS card can use? If i got RBS, HSBC,Citi,Maybank,OCBC,UOB can i do bill payment also to POEMs?

Oh yes and when you are doing this, did you receive a call from any POEMS people asking you questions as they may deem it as money laundring with cash coming in and going out?

Mike Dirnt said...

thanks. yes it can only be done from DBS as they allow bill payment from credit card to be paid to trading accounts.

poems cash management account is a short term cash account. so they usually expect cash in and out from traders/investors on a daily basis.

there is nothing illegal about this as DBS/POSB permits it. i heard the other banks do allow it last time but had stopped now.

Ranter in Singapore said...

MMF is not a sure win fund?? The value may drop as well and you might end up losing part of your principal sum??