From 1st October 2020, OCBC CashfloCredit Card will now impose a 1% processing fee for Great Eastern premiums charged under a 12-month installment plan. If you are using your Cashflo Credit Card to pay for your Great Eastern premiums, this is something that you will want to take note of.
OCBC Cashflo Credit Card Pre-October 2020
To be honest, the OCBC Cashflo credit card has great advantage for Great Eastern policy holders. To summarize, these are the 3 greatest advantage they offer.
Allow the policy owners to be charged annually to get cheaper premiums. (to be explained below)
Allow policy holder to better manage their cashflow / wealth management. (as they will be paying monthly)
Get cash rebates (0.3% cash rebate on your premiums for selected Great Eastern Life and Great Eastern General insurance plans)
To set the context, paying annual premiums for (non-ILP) insurance policy typically gives around 3% discount. Imagine this, the annual premiums for the policy is $12,000. The same insurance policy will cost $1030/month ($12,360/annually) if you decide to pay by monthly mode.
The client saves $360/year by being charged annually using the Cashflo Card. He is able to pay monthly $1000 to manage his cashflow better and get $3/month cash rebate (assuming that the card is only used for this policy.)
Net Benefit: $396 per year ($360 + $36)
OCBC Cashflo Credit Card Post-October 2020
From 1st October 2020, there will now be a 1% processing fee if the policy holder decides to take the option to be charged annually AND cash rebates will no longer be awarded for Great Eastern premiums.
What should you do?
Let’s take the above situation again where the policy holder is paying $12,000 annually.
The client saves $360/year by being charged annually using the Cashflo Card. Customer wants to have it via installment and have to pay $120/year for the processing fee. There is no longer any cash rebates.
Net Benefit: $240 per year ($360 – $120)
There is still net saving if you use this method of paying for the premiums.
It is no fun having your net benefits being slashed especially if you have been reaping the benefits from this for years. However, this is not the first time that credit card’s benefit is being updated to reflect the current market situation.
I believe that this will happen in future as well. Do keep yourself updated on these changes.
Speak to your financial advisors for future clarification.
No one will care about your money as much as you do.
I’m really excited when the insurance industry comes up with a new disruption. I believe that with disruption, there will be improvements in the overall industry. Today, I will be reviewing SNACK BY Income (NTUC) proposition to see if we can fit it inside our Wealth Management Journey.
[All opinions are my own. Please read my disclaimer section to find out more. If it matters, this is not a sponsored post]
SNACK BY INCOME
SNACK By Income is a “new” insurance model by allowing customers to buy micro-insurance when one of the lifestyle triggers happens.
This means that you buy insurance (Death, TPD, Critical Illness or Accident with premium of $0.30, $0.50, $0.70 which is automatically deducted) whenever a lifestyle triggers happen (Clock Number of Steps, Take Transport, Buy Food & Drinks, Shop, Groceries, Watch Movies, Top Up Petrol, Pay for Utilities). You can decide on which triggers to allow the purchase of Insurance to happen.
There are caps at how much you can stack your micro-insurance and I believe the premiums divers depending on age of the individual. You can stop or pause the purchase as and when you want.
Let’s Give An Example
Example: Joanna set up his Snack By Income to deduct $0.50 for Transport and Buying Food and Drinks. During the course of the day, she takes a bus to work (first premium deducted), had lunch (second premium deducted) and then takes a bus back home (third premium deducted).
Each activity triggered a S$390 personal accident insurance plan with a premium of S$0.50 each. (Source: Mothership).
In total, she spent $1.50 for that day and got $1170 worth of personal accident coverage.
In a month, she would have spent $45 (30 days in a month assumption) to have $35,100 worth of personal accident coverage.
What I like about SNACK BY INCOME
I think it is a good initiative to expose people to insurance at any age. The gamification process will attract the younger generation to look into what insurance they can have.
The level of commitment of SNACK By Income is very low. The range of $0.30 to $0.70 is a very low barrier for people and they may allow the deduction to continue to take place. The premiums are also single premium in nature so the micro coverage can continue for the next 360 days without the need to continue paying for it.
It is flexible. You can choose the coverage you want, start the deduction, set a weekly limit or stop the deduction at any time with no penalty.
If you are afraid to approach a Financial Advisor, SNACK By Income is a APP which might be perfect.
What I don’t like about SNACK BY INCOME
Using my example above, $45/month can get a person a comprehensive accident coverage AND (potential) pay for his hospital shield rider’s premium. If she is going to set triggers for those deduction above, I believe she is might better of with the usual insurance plans.
The illusion that “They have a lot of insurance”. Snack By Income (if I may) is a bonus coverage for people to have. The micro-coverage terminates after 360 days and you have to “re-stack” up your insurance again.
Commitment Issues. I worry about this most. If this creates a behaviour that they don’t have to committed to their premiums, I believe it might have a spill over effect to other things in life. (Snack by Mortgage Anyone?)
Buying insurance is NOT financial planning. I think most people think that buying insurance is financial planning. In actual fact, it is just part of financial planning. There are many other things to plan for other than insurance.
When NTUC first launched Snack By Income, it triggered my memory of an old client of mine and I felt it may be the most suitable for them.
I first met this couple when they needed my help to do a claim. The wife works at Sheng Siong as a cashier and the husband worked as a taxi driver. They live in a HDB 3 room flat with 2 young children. The husband was down with stage 4 Colorectal cancer and had to stop working as a taxi driver.
While doing the claim, the wife showed me her bank book. I was surprised and asked her what she wanted me to see. I saw her bank balance is $1000 and she told me that she is making $1000/month as a cashier and spent around $1000/month for household expenses. With tears in her eyes, she asked me if she can purchase any insurance with that money. I knew that any insurance however good, will not be sustainable.
I believe that micro-insurance will be able to help this couple as they can choose to purchase the micro-insurance as and when they have the available budget. I believe these people will be the true beneficiaries of Snack By Income. Thank you NTUC.
No one will care about your money as much as you do.
I thought I had a conclusion deciding between Cashback or Airmiles when using a credit card. However, the existence of CardUp might change the entire equation all together.
[If it matters, this is not a sponsored post.]
What is CardUp?
CardUp is a platform that enables payment and collection of big expenses using existing credit cards, in places where cards are not accepted today. Example of such expenses includes rent, income taxes, educational loan, insurance (usually points are not applicable for insurance) etc. CardUp allows you to use credit cards to pay for those bills.
One of my friends shared with me that he had to PayLah his landlord his monthly rental of $1000. Unfortunately, most landlords do not accept credit cards. $1000/month is a big expenditure and if he is able to use a credit card, he might be able to collect cashback or airmiles along the way.
How does CardUp work?
Basically, CardUp acts like a middleman. You pay CardUp via credit card, CardUp will pay your vendor/suppliers/landlord for you.
In doing so, you get to collect cashback or airmiles which will otherwise be lost if you make a normal bank transfer. CardUp is currently a plug and play system. Simply sign up for an account, enter the details of your preferred credit card/s and you can start to make and schedule payments.
CardUp will take a processing fee of between 2.25% to 3.3% for that transaction. Typically, it will take around 3 business days for your recipient to get the money. However, if you need a next day transaction, an additional 0.3% fee applies.
Currently, CardUp is able to perform transaction for the following.
Rental payments (to a landlord)
Rental deposits (to a landlord)
Condominium Maintenance Fees (to a MCST or property developer)
Tuition/School fees (to Singapore based schools or education centres)
Income Tax/Property Tax/Corporate Tax/GST/Stamp Duty
I believe CardUp will expand their services in the years to come. I have bold a couple of expenses in bold because I believe those are the more general expenses that everyone will pay. We will be using it to illustrate whether it is worth it to use CardUp or not.
Is it worth it to use CardUp?
We have to set a few assumptions and context to see if it is worth it. In my previous article on whether you can afford cancer, a typical medium income in Singapore is $56,550. I will draw a few assumptions from this income.
Example #1: Eric (Single. Stays with parents. Pays some of the household bills)
Eric is working as a marketing executive in a SME. His annual income is $60,000. His annual income tax is $1950 (we are assuming he do not have any other income nor reliefs). He lives with his parents in a 4 room HDB flat and is paying for the electric bills (Annual Electricity Bills: $1608. Source:Average monthly electricity bill of a 4-room HDB household). He pays around $9000 annually to an insurance company.
Total Annual Recurring Bills: $12,558 (or $1046.50/month)
As you can see in the above screenshot, Eric will have gotten a net saving of $130.
If Eric were to choose miles, he will have 17,178 Airmiles which he can use to change for an airticket once he have accumulated enough. (I’m putting $12,000 into income tax for simplified illustration purposes only)
Example #2: Joseph (Married with one child. Bought a house with wife. Pays some of the household bills)
Joseph is working as a teacher. His annual income is $60,000. His annual income tax is $1950 (we are assuming he do not have any other income and excluding reliefs). He lives with his wife in a 4 room HDB flat and is paying for the electric bills (Annual Electricity Bills: $1608. Source:Average monthly electricity bill of a 4-room HDB household). He pays around $9000 annually to an insurance company. He also pays for his son’s childcare fees of $800/month (Annual: $9600). He also pays for the helper of $700/month (Annual: $8400).
Total Annual Recurring Bills: $30,558 (or $2546.50/month)
As you can see in the above screenshot, Jospeh will have gotten a net saving of $660.
If Joseph were to choose miles, he will have 42,945 Airmiles which he can use to change for a Business Class Airticket to Bali worth $1,154. His flight savings is $557. (I’m putting $30,000 into income tax for simplified illustration purposes only)
If the recurring bill amount is smaller, cashback might be the preferred option as you probably have to wait another full year to get enough airmiles to fly. However, if the recurring bill is larger, you might be slightly indifferent towards airmiles or cashbacks.
In whichever your preference, CardUp will help you collect cashback or airmiles which will otherwise be lost if you make a normal bank transfer.
Some last words of advice: CardUp dependent on the bank’s credit card benefits. Any change in the rules of credit card benefits / airmiles redemption will affect the calculation as of above. We are writing in the view of a personal finance perspective. We recognize there might be other cashflow benefits for businesses to use CardUp. The information is update on 12 Aug 2020.
No one will care about your money as much as you do.
Before we explore what will happen to our insurance policies after the companies sell that business away, we need to explore why would they even want to sell that business unit away if it is profitable.
It could be any of the following reasons:
Business strategy has changed
Raise funds to divest for peripheral operations (This is AXA’s cited reason)
Concentrate on other business lines
Focusing on other geographical markets
Being offered a good price / Cashing out on business
The list goes on. Insurance companies also acts like normal businesses and they will probably consider the sale of that business unit when an opportunity arises.
Is this the first time it happened?
It happened various times in the past and I believe this will happen again in the future.
You can see that there is a fair amount of transaction that took place in Singapore shores as well.
What Will Happen To My Insurance Policies If My Insurer Sells Away Their Business?
I think that’s the key to the topic today. I have contacted the Life Insurance Association of Singapore (LIA) to confirm above. This is their response. I will bold the information that is relevant to consumers.
All insurers are licensed and are regulated by the Monetary Authority of Singapore via the Insurance Act, and its subsidiary legislation, and regulations. Due to the long term nature of life insurance policies, there are provisions* in the Insurance Act which the licensed insurer has to comply with, in an event of a voluntary transfer of business or re-structure of business or business failure, to safeguard the interests of policyholders. Refer to *Part IIIAA on Transfer of Business and Shares, Restructuring of Licensed Insurer and Winding Up.
Business Transfer (Buy-Over)
Depending on the deal agreed between the two parties, the buying insurer will generally become responsible for all policies of the selling insurer. For the individual policyholder, his policy’s terms and benefits will be unchanged, and will continue to be honored by the buying insurer.
In short, suppose you hold a policy issued by Insurer A. Insurer A is sold to Insurer B, Insurer B will become your insurance company. Your policy, now under B, will be untouched and will be made good by B.
Your policy will still be in-force and be taken care of the new insurer. The next question will then be who will be taking care of your insurance policy from then on?
No one will care about your money as much as you do.
When I ask this question to my clients, the first response I get is: HOW I FIND SUCH A JOB??
Last Sunday, Straits Times published an article titled $30,000 salaries, yet in serious debt (it is an premium article). This started almost an outrage in the Wealth Management and Personal Finance community in Singapore. Most of the comments were related to where to find such a job and probably missed the point of personal finance. Let’s explore the reasons when $30,000 salary a month is not enough?
Reason #1: You spend more than $30,000 a month
Typically, as we grow in affluence, our purchasing power increase and we tend to spend more to.
Meet John. John is a hardworking young professional. His first salary was $3000/month and he had to live a simple lifestyle. Along the years, John got promoted for his outstanding working performance and ability to show results. His salary gradually increase to $15,000/month. John is now working harder at work and often end work late. He will take a cab home (he used to take the public transport) and order a good meal from a nearby restaurant (he used to cook) to reward himself for the hard work. When he sees something that likes during shopping, he will buy it immediately (he used to ponder if the item is essential) because he feels that he can afford it and he don’t have much time to shop anyway. He buys his friends meals (he used to go dutch) because he feels he is doing well.
John wakes up one day and was shocked to find out that his bank account balance haven’t been increasing after his promotion and has decreased.
If you spend more than you earn, then you will be in deficit.
Reason #2: You acquire more debts that you can handle.
Previously, I wrote about a Quick Ratio that we can use to evaluate whether the company is financially healthy.
“A company CANNOT go bankrupt if it doesn’t have debts” ~Chengkok
I can’t remember who said this before so I’m just going to quote myself until someone prove me wrong. (Haha). During the COVID19 season, we are seeing record number of companies going bankrupt and closing down. Examples are like JC Penny, Hertz and AMC just to name a few. If you look at their financial records, it would be just a matter of them that they will go under.
Similarly, for personal finance, if you take on too much debts than you can handle, your cashflow will be severely impacted.
Reason #2.1: Leverage
Reason 2.1 is a compounder for reason 2.
When I was 19 years old, I was scared stiff of the stock market. That was because I had a friend who lost over USD$50,000 in one night in his CFD trade. $50,000 is a huge sum to a 19 year old kid and it scared me silly.
Leverage works like this. You ONLY require a SMALL sum to get a BIGGER exposure. Most people who have limited capital are attracted to this because of the high returns. However, if the stock price goes south, you have to pay for the exposure too. A capital of $10,000 can easily give you an exposure of $200,000. However, if the stock price plunge, you could lose a significant portion of the $200,000 that you DO NOT EVEN HAVE and hence acquire the debts that you don’t want.
“Go big or go home. Typically in investing, people go home” ~Chengkok
Reason #3: Bad Habits
In The Straits Times article, bad habits or poor financial planning will cause your financial downfall no matter how much you earn. Data from the Monetary Authority of Singapore shows that
34 home owners have asked to stop payment for their loan until December
2100 people have problem paying education and renovation loans
6200 have asked to convert high credit card debt into term loan on lower interest rates
The list goes on. Gambling is also one habit that might cause financial woes. We are often reminded by the National Council on Problem Gambling on not to gamble especially during the Chinese New Year.
Some questions that we can ask ourselves in our financial journey.