SDA & Time Deposit

For several years, we didn’t have a TD account. Our regular savings account in BPI Direct is giving us a competitive rate that’s why I didn’t bother to look for other options thinking that time deposits will have almost the same rates.

After reading some books and doing my research online, I got into my feet and visited ten (yes, you read it right, 10!) reputable banks here in Ortigas. Since I am after fixed-income and short-term investments, I inquired about time deposit and treasury bills. And would you believe that a lot of bank personnels didn’t know their product?! Some were at a lost, and some didn’t even know the rate of withholding tax! You need to ask them questions related to the product and be able to speak the “not so” familiar financial terms. For instance, when inquiring about T-bills then you need to ask for the minimum investment required, prevailing rate, maturity days, discounted price and the net settlement amount, which would mean less withholding tax and other charges. I’ve learned that you need to make sure that you know what you are asking for to get the right answers. Since I did my homework and calculations in Excel, I was able to ask direct questions and got the best deal that I could. But what if I don’t? Then, I would probably walked away and stick to the regular savings since that one didn’t cause any trouble asking questions here and there.

Funny side of the story was during one of my visits in a bank branch along San Miguel Ave., the bank manager took suspicion on me and asked where I came from? I said, “I work here in Ortigas”, then I looked back and asked, “Why?” She said that she’s just checking if I didn’t come from other banks researching on what other banks offer to clients. It appeared to her that I am very certain with what I am looking for. Now that’s what I got for making myself more informed. But nevertheless, no regrets! I didn’t get their services either since I found something better applicable for my short term goal.

So here’s what I found. Investing on SDA (Special Deposit Account) being offered by BSP (Bangko Sentral ng Pilipinas) is good considering that it has better interest rates compared to TD. BPI is offering the lowest minimum investment for SDA giving 4.45% net interest per month. And for TD, considering that no risk involved, ChinaBank offers the best rates among the ten banks I visited especially for 30 days tenure.

I am disclosing this information to help others save and invest their money wisely. Please note that I am not endorsing these banks. In case you found something better, then go ahead and share!

Update:

After 1 month, I've noticed that the TD rates increased, so it will be good to have the 30 day term to avail of the higher interest much sooner (for short term). For SDA, I availed of the automatic roll-over of principal and interest. I checked my account on-line and so far so good! I just have to wait for the letter from the bank to know the exact maturity date for next month and be able to add something to it. :-)

Update 2 (July 2009)

The interest rates particularly on TD dropped tremendously. I’ve mentioned on this post that CBC was offering the best rates way back in Aug 2008. I’ve started there with 4.25% and it went up as high as 5.25% last Dec 2008. But here comes Jan 2009 and the rate dropped to 3.25%. And now, as of this writing, it is just at 2.5%! I need to find time to fix this. I am observing PS Bank currently with 3.0% interest rate, but am not sure if it would be worth the effort to transfer since their rates are also decreasing fast.

Same thing for BPI-SDA, net interest rate dropped. I’ve started with 4.45% net interest, and now it is just giving me 3.36%. My husband recently suggested Citi e-Savings Plus with 4.75% p.a. gross rate (subject to 20% withholding tax). But still quite high isn’t? Not really! The catch is that the interest rate only applies to the deposit in excess of 100k! So after doing the math, I still prefer SDA which gives us full interest for everything we’ve invested on them. Hoping that in times like this, a better deal will really surface. It’s been almost a year and probably, I need to re-shop around the banks again.