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Sunday, March 9, 2014

Not So Super After All (Public Bank Super FD Rates Campaign)

KUALA LUMPUR: Public Bank has launched its "PB Super FD Rates" campaign for customers seeking long-term fixed deposit placements with higher step-up interest and also receive regular monthly interest payment.
It said on Monday individual customers had to place a minimum of RM30,000 fresh funds.
The campaign is open to all new and existing Public Bank individual customers from Jan 28 to June 30, 2014.
The campaign offers step-up fixed deposit rates to as high as 8.88% per annum to individual customers.
Public Bank said from the total placement amount, 80% would be placed under one month PLUS Fixed Deposit (PLUS FD) auto-renewable for 12 consecutive months at a step-up rate whilst 20% of the funds would be deposited into the PLUS Savings Account earning interest at the current prevailing rate.
Each individual customer could place up to a maximum of RM3mil under the campaign.
Public Bank said the campaign enabled customers to withdraw the fixed deposit at any time and customers were still entitled to the prevailing one-month PLUS FD counter rate without any penalty.

My comments:
Public Bank's super big 8.88% is extremely misleading. Let me explain: [1] 8.88% is for month 12, 1-month ONLY, in fact at the last month only [2] The effective annual rate (EAR) is 4.33% for the 80% portion [3] The remaining 20% is deposited to the Saving Account at prevailing rate as stated here:
Assuming you invest RM 100,000. 80k/20k. The effective interest (that you see rolling into your bank account) is only (80%*4.33% + 20%*0.20%) = 3.504%! Even at the highest prevailing rate that's if you have RM 1 million: (80%*4.33% + 20%*1.20%) = 3.704%! That's a huge 5%+ gap. Can you tell me why these rates are considered SUPER? Oh because it is super misleading
It is amazing that BNM can approve this, Zeti (our BNM chairman) probably can understand but you think everyone is Zeti out there? Financial literacy is not something taught in school. Me and you, we went through the same education system in Malaysia (primary to tertiary). The greatest thing I obtained there in my toolbox is copy, paste and modify.
Aunties and uncos are sure to be confused. I bet several young people will too. I mean just look at the picture below.
More numbers to digest than alphabets. What? 
The definition of marketing is to communicate the value of a product or service to customers for the sole purpose of selling it to them with a goal of increasing sales volume/profit. Where is the value here? 8.88%? 3.68%? 3.78%? 3.88%? 4.88%? 6.88%? Prevailing FD rates? Just say something like 3.504% to 3.704% 'apa susah sangat'?
Like a friend who told me, man this is a "marketing big con job".

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