[Heated Savings and Deposit Competition] Will Secondary Financial Institutions Surpass 4%?…Beware of Joining Recklessly

SBI Savings Bank Deposit Interest Rate Up to 4.35%
Saemaeul Geumgo Also Offers Interest Rates in the 4% Range
Check Conditions Carefully When Joining Special Deposit Offers
Interest Gains May Be Small Depending on Period and Limit

[Asia Economy Reporter Song Seung-seop] Due to accelerated competition in deposit interest rates, a relay of interest rate hikes on savings and time deposits is taking place in the secondary financial sector. Time deposit interest rates have already surpassed the 4% mark. However, there is also advice to carefully examine the conditions, as preferential interest rate requirements may be difficult or the actual interest earned may be small.

According to the industry on the 4th, SBI Savings Bank conducted a special deposit promotion earlier this month on its own financial platform, Saida Bank. The compound interest time deposit is the target, with interest rates up to 4.35%. This is currently the highest interest rate among domestic time deposits. The basic interest rate is 3.15%, with an additional preferential interest rate of 1.2 percentage points. The subscription period is 12 months, and deposits can be made up to 10 million KRW. It is sold on a first-come, first-served basis for 40,000 accounts until the 31st of this month.

On the same day, Sangsangin Savings Bank also raised interest rates on deposit products. The revolving time deposit interest rate increased by 0.5 percentage points to a maximum of 3.81%. There are no special preferential conditions, and if the interest rate rises during the subscription period, the higher rate is applied. The time deposit product interest rate was also set at 3.71%, up 0.5 percentage points.

Other secondary financial institutions are also launching deposit products with interest rates approaching 4%. Among credit cooperatives, Gyeongdong Credit Cooperative set the Union Time Deposit interest rate at a maximum of 3.92% (12 months), the highest rate. The basic interest rate is 3.50%. Daemyung Credit Cooperative offers the same product with a maximum interest rate of 3.80% without preferential conditions. This means that interest approaching the 4% range can be earned as the basic interest rate. Saemaeul Geumgo also recorded time deposit interest rates in the 4% range at 12 branches including Seoul Livestock, Gangbuk, and Myeongdong.

Performance-linked products have a maximum interest rate of only 7.7%... Conditions must be carefully examined

The rapid increase in deposit interest rates in the secondary financial sector is due to funding issues. Companies in the secondary financial sector cannot raise funds by issuing bonds like commercial banks. This means they can only gather funds through customer savings and deposits. To conduct lending operations, deposits must increase accordingly, and in the secondary financial sector, raising interest rates is considered virtually the only means.

However, blindly depositing money just because the interest rate is high can result in funds being tied up and losses or failure to gain actual benefits. This is because the conditions to receive high-interest benefits are often complicated. In particular, products that include credit card spending as a preferential interest condition require spending a certain amount over several months. Additional expenses may exceed the interest earned from the preferential rate, making the cost outweigh the benefit.

According to the Financial Supervisory Service, among special promotion savings and deposit products launched from January to September last year, only 78% of the highest level of interest was actually paid to customers at maturity. The FSS attributed this to complex and difficult-to-achieve preferential interest conditions. Especially for special promotion products requiring performance through partnerships, only 7.7% of subscribers received the highest interest rate.

There are also products with short subscription periods or small limits. Even with a "4% annual" interest rate, if the subscription period is 6 months, the interest received at maturity decreases. Some products have high interest rates but limits as low as 100,000 KRW, resulting in actual interest gains of only a few tens of thousands of KRW.

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