Annual 5% Within Reach... Rapidly Rising Savings Bank Deposit Interest Rates

[Asia Economy Reporter Song Seung-seop] As the base interest rate rises rapidly, savings banks are becoming the choice of interest rate nomads. Idle funds that have not found suitable investment destinations are also flowing into savings banks.

According to the financial sector on the 30th, the average fixed deposit interest rate in the savings bank industry is 3.37% per annum (based on 12 months). This is a 1 percentage point increase from the 2.37% rate at the end of last year. Considering that the deposit interest rates of KB Kookmin Bank, Shinhan, Hana, Woori Bank, and internet-only banks are only in the 2.2% range, the savings banks' rates are more than 1 percentage point higher annually.

In particular, savings banks' parking accounts are gaining popularity. They offer high interest rates even if money is deposited for just one day, allowing customers to earn interest. JT Savings Bank’s ‘JT Jump-up Savings Deposit’ provides an interest rate of 1.3% per annum without any complicated preferential interest conditions or limits on deposit period or balance maintenance. OK Savings Bank offers 3.0% per annum interest on deposits up to 10 million KRW and 0.8% per annum on amounts exceeding 10 million KRW through its ‘OK Eut Account’.

The base interest rates of parking accounts are also rising one after another. SBI Savings Bank raised the interest rate of ‘Cider Bank’s deposit and withdrawal account’ to 2.2% per annum for balances up to 100 million KRW this month. Welcome Savings Bank set the interest rate of its ‘Welcome Office Worker Love Regular Deposit’ product at 3.0% per annum, and customers can receive an additional 0.2 percentage point preferential rate when registering their accounts with open banking services of commercial banks and securities firms.

Some products are approaching the 4% interest rate range despite being deposits. Moa Savings Bank announced yesterday that it raised the interest rate of its ‘e-Revolving Fixed Deposit’ from 3.4% to 3.7% per annum, a 0.3 percentage point increase. If the compound interest option is selected, the final interest rate rises to 3.76% per annum.

The increase in deposit interest rates by savings banks is influenced by the Bank of Korea’s sharp hike of the base interest rate to 2.25%. Unlike first-tier banks, savings banks cannot raise funds through bond issuance and must rely on deposit funds. They are in a position where they must attract customers by maintaining higher interest rates than banks. Accordingly, the industry expects that products with interest rates in the 5% range may be introduced within this year.

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