Interest Rate Ice Age at 5%... "Let's Switch to High-Interest Savings"

Rush of High-Interest Products Amid Expectations of Further Rate Cuts in the Ultra-Low Interest Rate Era

[Asia Economy Reporter Kim Min-young] Amid the low interest rate environment, a growing number of "interest rate nomads" are switching banks to find savings products that offer interest rates as high as 5% per annum. This trend is interpreted as people putting their money into safe assets that offer even a small additional interest, due to expectations of further rate cuts in the ultra-low interest rate era and increasing economic uncertainty. From the financial institutions' perspective, although there is a burden regarding interest rates, it is effective in securing potential loyal customers.

According to the financial sector on the 13th, Woori Bank’s “Woori Magic Savings by Hyundai Card,” launched on the 8th and offering up to 5.7% interest, had sold 1,714 accounts as of the 10th, just two days after its release. The average subscription amount was 403,000 KRW.

This product is characterized by offering higher interest rates than savings banks. However, the conditions are somewhat strict. It provides a basic 1.7% interest rate, a 0.5 percentage point preferential rate for first-time transactions or salary account registration, and up to 3.5 percentage points of special preferential rates depending on card usage. For first-time Woori Bank customers, if they record Hyundai Card usage of over 6 million KRW annually, they receive a 3.0 percentage point preferential rate, and an additional 0.5 percentage point preferential rate is given if they set up one automatic transfer via Hyundai Card. For existing customers, if their annual card usage exceeds 10 million KRW, they get a 1.0 percentage point preferential rate, and an additional 0.5 percentage point preferential rate is given for one Hyundai Card automatic transfer.

A Woori Bank official stated, “Word of mouth about this high-interest savings product has spread online through blogs and YouTube, resulting in good subscription performance in the early stages of its launch.” This product is limited to 100,000 accounts.

Savings banks, where even a 2% annual interest rate has become hard to obtain, are also actively competing to attract customers by introducing high-interest savings products. Welcom Savings Bank’s “Welbanghaja Savings,” launched last month, recorded 14,500 cumulative subscriptions as of the 10th. A Welcom Savings Bank official said, “After recording 7,000 subscriptions in just one day after its launch on the 11th of last month, the number of subscribers has been steadily increasing.”

By meeting a few conditions, customers can secure a 5.0% interest rate. The basic interest rate is 1.5% per annum, and if CMS or Giro automatic payments of two or more transactions per month are made through Welcom Savings Bank’s free deposit and withdrawal account for six months or more during the contract period, a preferential interest rate of 2.0 percentage points is paid. Additionally, if the average balance of the free deposit and withdrawal account is maintained at 500,000 KRW or more, an additional preferential interest rate of 1.5 percentage points is provided.

Acueon Savings Bank also launched a mobile-exclusive special sales product with a 5.0% interest rate on the 7th to commemorate the revamp of its mobile application (app). This product is limited to 10,000 customers. The basic interest rate is high at 3.9%, and if customers agree to the Acueon Membership Plus service, they receive an additional 0.1 percentage point, and if they register one automatic transfer and make payments for six or more installments, they receive a 1.0 percentage point preferential interest rate.

A financial sector official advised, “Rather than being disappointed by the low interest rates on deposits and savings, it is a good idea to wait for special promotional offers from financial companies or to check the joint savings bank app ‘SB Toktok’ for announcements of new product launches, as savings banks often offer relatively higher interest rates.”

This content was produced with the assistance of AI translation services.