'Several Times the Base Interest Rate' Preferential Interest Rates on Savings and Deposits... Navigating the Increasingly Stringent High-Interest Benefits

Preferential Interest Rates Require Adding Other Services Such as Utility Bill Transfers and Bank App Usage

[Asia Economy Reporter Sunmi Park] In the era of ultra-low interest rates, commercial banks are actively attracting market funds by launching high-interest savings and installment savings products one after another. Although they offer high interest rates of up to 6-7%, customers need to use additional financial services such as issuing a card, transferring utility bills, or using the bank’s application (app) to enjoy preferential interest rate benefits, so careful attention is required before subscribing.

According to the Bankers Association on the 22nd, the basic interest rates of savings and installment savings products from the five major commercial banks?KB Kookmin, Shinhan, Hana, Woori, and NH Nonghyup?are only around 1%. However, if customers use various additional financial services, they can receive interest rate benefits up to about 7%. For fixed installment savings products, the basic 12-month interest rate is formed at around 0.6-1.9%, but including preferential interest rates, customers can earn interest rates ranging from 1.0% to 7.0%. For fixed deposits, the basic 12-month interest rate is around 0.3-0.9%, but the highest preferential interest rate can reach 0.6-1.15%.

Special promotional products have stricter conditions to meet due to the large preferential interest rate benefits. The ‘Shinhan The More Installment Savings,’ sold with a limit of 100,000 accounts until September 30, is a 6-month maturity free installment savings allowing deposits up to 300,000 KRW per month. The basic interest rate is 1% per annum, and with preferential interest rates added, customers can receive up to 7% per annum. Since the product was originally designed to increase Shinhan Card users, customers who have no Shinhan Card usage history in the previous six months must issue the ‘Shinhan The More Card’ and use it for more than 600,000 KRW over six months to receive an additional 5.0 percentage points per annum, and if they agree to Shinhan Card marketing and credit limit increase, they can receive an additional 1.0 percentage point per annum.

How to Receive Preferential Interest Rate Benefits?

Woori Bank is also conducting a limited special sale of 100,000 accounts for the ‘Woori Magic Installment Savings by Lotte Card,’ which offers a maximum annual interest rate of 7%. The basic interest rate is 1.5% per annum, and if customers subscribe to Woori Open Banking and agree to product and service marketing, they receive an additional 0.5 percentage points per annum. New customers can get an additional 5.0 percentage points per annum depending on Lotte Card usage performance. Separately, the ‘Woori Pay Installment Savings,’ which offers up to 6.0% annual interest based on usage performance of Woori Pay?where credit/check cards or bank accounts are registered on the Woori One Card app for payment?is also on sale.

However, there are concerns that high-interest savings and installment savings products sold by banks in the low-interest-rate era are not suitable for accumulating a large sum of money because the deposit limits are set, so even if customers receive all the interest benefits, it may not be ideal for lump-sum savings.

Previously, the 10% annual interest installment savings product launched by KB Kookmin Bank in partnership with E-Mart also received a hot response, but since it is a product where customers deposit 100,000 KRW monthly for one year, many customers expressed disappointment that the interest earned was not substantial. In fact, customers can only receive the 10% interest if they meet all conditions such as purchasing more than 1.2 million KRW annually at E-Mart stores and accumulating Shinsegae points under their name. Some responses indicated that the E-Mart discount coupons provided together with the savings subscription were more attractive than the interest rate.

Although market liquidity is abundant, due to real estate market regulations, cryptocurrency market turmoil, and sluggish public offering subscriptions, there is no suitable investment destination, so it is expected that banks will continue to sell high-interest savings and installment savings products to absorb liquidity for the time being. The bank liquidity coverage ratio (LCR), which was temporarily eased due to COVID-19, is also approaching normalization, so banks need to increase deposit balances.

A representative from a commercial bank said, "Even though the preferential interest rates are high, the deposit limits are set, so the risk of loss is low, and banks can aim to attract new customers and create synergy with other financial affiliates. Therefore, high-interest savings and installment savings products with various preferential interest rate conditions will continue to be released steadily."

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