Savings and Time Deposits Making a Comeback... Interest Rate Competition Heats Up

Preference for 'Safe Assets' Amid Base Rate Hike and Asset Market Volatility
Toss Bank Offers 2% Interest Unconditionally... Signal of Competition
Internet Banks and Commercial Banks Also Launch High-Interest Special Promotions

[Asia Economy Reporter Kim Jin-ho] Office worker Kim Taegyun (35, pseudonym) recently signed up for deposits at Toss Bank and Shinhan Bank's First Salary Dream installment savings product to accumulate a lump sum. Kim, who has been working for six years, had actively invested in asset markets such as stocks and cryptocurrencies but changed his mind to invest in safe assets after suffering significant losses due to the recent unstable market conditions. Although the returns are lower compared to stocks, the principal is guaranteed, and interest rates have risen compared to before, making it suitable for the purpose of accumulating a lump sum.

Consumer interest in bank deposits and installment savings, which had been overlooked as investment options during the prolonged low-interest-rate period, is reviving. This is because the Bank of Korea’s monetary policy normalization is raising deposit interest rates, and the preference for safe assets is spreading amid stock market instability. The recent launch of Toss Bank offering high-interest products without conditions is also seen as a trigger for igniting interest rate competition.

According to the financial sector on the 18th, among major commercial banks and internet banks, Toss Bank offers the most attractive deposit interest rates. Toss Bank’s deposit products feature a 2% interest rate with no conditions. Interest is provided for the exact number of days the money is deposited, and benefits apply even if the deposit is withdrawn early.

Due to these exceptional benefits, consumer response has been enthusiastic. Toss Bank’s pre-registration customers number about 1.6 million. Currently, around 400,000 to 500,000 have newly signed up, and Toss Bank plans to complete account openings for the remaining approximately 1 million pre-registered customers within this month.

Internet banks launched earlier, such as Kakao Bank and K Bank, also offer relatively higher interest rates compared to commercial banks. Since the 1st, K Bank has raised the interest rate on its ‘Code K Time Deposit’ to 1.5%. Right after the base rate hike announcement in August, it had increased deposit interest rates by 0.2 percentage points. Kakao Bank raised deposit and installment savings interest rates by 0.3 to 0.4 percentage points last month. For deposits, it offers 1.5%, and for installment savings, 1.8% interest when automatic transfers are set up.

Commercial banks have also recently introduced high-interest deposit products one after another. IBK Industrial Bank launched the ‘IBK Altos Installment Savings.’ This is a flexible installment savings product offering preferential interest rates based on the performance of the Altos volleyball team in the ‘Dodram 2021?2022 V-League.’ The contract period is one year, with a maximum monthly deposit of 500,000 KRW, and it is sold in a limited quantity of 50,000 accounts until the end of the year. The basic interest rate is 1.00% per annum, and the maximum preferential interest rate is 2.00 percentage points, making the highest interest rate 3.00% per annum.

Shinhan Bank is selling the ‘First Salary Dream’ installment savings product targeting office workers. It offers preferential interest rates to salary transfer customers, with a high interest rate of up to 4.40% per annum. It is popular because both new employees and customers transferring their salary accounts can receive preferential interest benefits. Hana Bank offers up to 3.5% compound interest per annum for new employees aged 35 or younger who subscribe to the ‘Salary Hana Monthly Compound Interest Installment Savings,’ depending on card usage performance.

Although somewhat demanding, products offering up to 7% annual interest rates if conditions are met are also noteworthy. Woori Bank’s ‘Woori Magic Installment Savings by Lotte Card’ guarantees up to 7% interest depending on Woori Bank transaction performance and Lotte Card usage. For customers who mainly use Lotte Card, this product can be very attractive.

A bank official said, “As the base interest rate is likely to rise further due to monetary policy normalization, it is better to subscribe to one-year deposit and installment savings products rather than long-term deposit products,” adding, “We expect consumer demand for deposit products, which had been overlooked in the low-interest-rate environment, to increase.”

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