[Financial Essay] Our Attitude Living in the Era of 0% Deposit Interest Rates

[Asia Economy Reporter Kim Min-young] The one-year fixed deposit interest rates at the five major commercial banks have all fallen to the 0% range. This is due to the Bank of Korea lowering the base interest rate to 0.75% on the 17th of last month. With deposit interest rates dropping, even if people entrust a large sum of money to banks, the returns they receive are only a small amount. Amid the prolonged COVID-19 pandemic, low-income earners who urgently need cash are canceling their savings and time deposits. Meanwhile, some disappointed by the near-zero interest rates are withdrawing money from banks and jumping into the stock market.

According to the financial sector on the 19th, Shinhan Bank lowered the interest rates on Shinhan S Dream fixed deposits and SOL Convenient fixed deposits from 1.10% to 0.90% (based on one-year maturity) as of the 16th. The general fixed deposit interest rate also dropped from 0.90% to 0.80%.

KB Kookmin Bank lowered the Super Fixed Deposit interest rate twice last month from 1.15% to 1.05%, then to 0.90%. The general fixed deposit interest rate also fell by 0.2 percentage points from 1.00% to 0.80%. Woori Bank reduced the WON deposit interest rate from 0.75% to 0.65%, and the Wonmoa deposit interest rate from 0.75% to 0.50%.

On the 1st, NongHyup Bank cut the general fixed deposit interest rate by 0.3 percentage points from 1.00% to 0.70%, and the Great Satisfaction Real Deposit interest rate by 0.35 percentage points from 1.10% to 0.75%. Hana Bank also lowered the Hana OneQ fixed deposit and general fixed deposit interest rates by as much as 0.5 percentage points from 1.10% to 0.60%.

Now, even if you deposit 10 million won at a commercial bank, you will receive less than 90,000 won in a year. Financial consumers are dissatisfied, saying, "Depositing money in banks has reached a meaningless level."

Amid these ultra-low interest rates and the COVID-19 crisis, the number of people canceling bank savings and time deposits has surged.

According to the financial sector, the number of early cancellations of personal fixed savings and time deposits at the five major banks reached 1,342,821 cases in January and February. This is an 8.7% increase compared to the same period a year ago (1,234,810 cases). The financial sector estimates that a significant portion of these are low-income earners urgently needing cash.

On the other hand, there is also an analysis that individuals are breaking their deposits to invest in stocks and other financial investments. With expected deposit returns close to zero, people are putting money into stocks to grow their assets despite the risk of principal loss.

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