Bare Minimum: Here’s A Passbook Savings Account You Can Keep Up With
I was browsing through some of the websites of local banks and I was pleasantly surprised to see this. For a relatively large, stable and publicly-listed bank, China Banking Corporation (China Bank) offers deposit products with such low requirements.
When opening a passbook savings account, aside from the documentary requirements, you’d want to look at three monetary requirements: 1) initial deposit requirement, 2) minimum monthly average daily balance, and 3) minimum balance to earn interest.
The initial deposit requirement is the first hurdle that you need to jump past. It’s the amount of money that you need to put in to open the account; anything less and you won’t be able to open one with the bank.
The minimum monthly average daily balance (ADB) is how much the bank expects you to keep in the account on average for an entire month. The typical calculation for this is your ending balance for everyday of the month divided by the number of days in that month. For example, my ADB for the month of June would be my ending balance for June 1 plus my ending balance for June 2 and so on and so forth until June 30, divided by 30, which is the number of days in June. If I had 1,000 pesos in my bank account on June 1 and made no deposits or withdrawals till June 30, my ADB would be 30,000/30=1,000. That’s a no brainer. Fall below your minimum monthly ADB and the bank will start charging penalties.
Lastly, the minimum amount to earn interest is the required amount of money for the bank to pay you interest earnings. The interest is expressed as a per annum (annual) rate and will be paid on a monthly or quarterly basis, depending on your bank. For example, a deposit account that pays an interest of 1% p.a. will pay 1% of your balance, divided by 12, or 0.083% per month. Twenty percent of this will be deducted as withholding tax on income. For example, if you keep 1,000 pesos in your bank account for this month, your bank will pay you an interest of 0.83 pesos and will deduct 0.17 pesos, leaving you earnings of 0.66 pesos for the month. Hey, at least your money earned something!
Now back to our featured passbook savings product, China Bank Peso Passbook Savings Account allows you to open and maintain an interest-earning savings account for as little as 1,000 pesos! The interest is fixed at 0.75% per annum. (Yes, less than 1%!) As a point of comparison, Banco de Oro’s minimum requirements to open and maintain an interest-earning regular peso passbook savings account is 5,000 pesos, which earns an (even much less) interest of 0.50% per annum. (Yes, still subject to 20% withholding tax!) Wouldn’t you now be trooping to China Bank and open an account today?
Before you do so, by the way, I just want to emphasize that your goal is to save money, not earn interest. So regardless the interest rate, as long as the minimum requirement permits you, go for it! Think of the interest as an icing (and a very small dollop of icing at that) on top of the cake. Focus on the cake because we want to make that cake grow because when that cake grows bigger, that when we start looking for icing. And the bigger the cake, the more room for icing! Enjoy saving!