Money Flows into 'Parking Accounts' with Up to 2% Interest Rate

Convenient Deposits and Withdrawals Anytime
Interest Paid Even for Just One Day, Popular Choice

[Asia Economy Reporter Kim Min-young] As historic ultra-low interest rates and the impact of the novel coronavirus disease (COVID-19) increase volatility in the financial markets, there is a growing tendency to stockpile cash in safe places. In particular, recently, with stock and bond investments not being attractive, a large amount of idle money is flowing into parking accounts. These accounts offer up to 2% interest rates, higher than fixed deposits that have dropped to the 0% range annually, and the ability to deposit and withdraw funds at any time is considered an attractive feature.

According to the financial sector on the 30th, the balance of deposits in the 2.0% interest rate demand deposit account sold through SBI Savings Bank’s mobile platform application, Cider Bank, recently surpassed 1 trillion won. This product, launched last year to commemorate the app’s release, is one of the parking accounts that calculates daily balances and pays interest on the first day of each month. A parking account refers to a free deposit and withdrawal account that offers relatively high interest rates even if money is deposited for a short period and withdrawn anytime, similar to temporarily parking a car.

An SBI Savings Bank official said, “Since market deposit interest rates are so low, not only existing customers but also many new customers are joining.”

Among commercial banks, SC First Bank’s ‘My Zoom Account’ is a representative parking account. Customers can set an amount up to 1 billion won, and as long as the balance exceeds that amount, they receive a 1.0% interest rate even if the money is deposited for just one day. According to SC First Bank, the recent deposit amount has exceeded 3 trillion won, and the number of subscribers has been increasing further since the interest rate cuts due to COVID-19.

Due to the Bank of Korea’s base rate cuts, the interest rates on deposits and savings at commercial banks are not attractive, so parking accounts are reaping significant benefits.

Major large banks are also selling parking accounts. However, conditions such as age or minimum amounts are somewhat strict. Shinhan Bank offers the ‘Main Transaction S20 Account’ to customers aged 18 to 30, providing a 2.0% interest rate on balances up to 2 million won. Hana Bank offers a 1.5% interest rate on balances up to 1 million won for customers aged 35 or younger who are subscribers of the ‘Salary Hana Account.’

NH Nonghyup Bank has no age restrictions but offers the ‘NH Main Transaction Preferential Account’ with a 2.0% interest rate on balances up to 1 million won if conditions such as monthly salary transfers of 500,000 won or more, credit or debit card spending of 200,000 won or more per month, and three or more automatic transfers or payments are met. Although the amounts are small, there are products with high interest rates even in commercial banks if you look carefully.

There are also forecasts that parking account interest rates may decline. A financial sector official said, “Parking accounts are the best way to attract new customers, so financial companies will maintain existing rates for the time being, but if ultra-low interest rates continue for a long time and the number of customers keeps increasing, they will not be able to withstand pressure to lower rates.” In fact, Kakao Bank lowered the interest rate on its ‘Safe Box’ (up to 10 million won), which is similar in nature to a parking account, from 1.0% to 0.7% on the 20th, a 0.3 percentage point decrease.