"Offering Higher Interest Rates on Savings and Deposits... But Card Issuance and App Usage Required First" (Comprehensive)

Annual 6~7% High-Interest Special Offers Released One After Another

[Asia Economy Reporter Park Sun-mi] 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 flexible installment savings product allowing deposits up to KRW 300,000 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 not used a Shinhan Card in the past six months must issue the ‘Shinhan The More Card’ and spend more than KRW 600,000 over six months to receive an additional 5.0 percentage points per annum, and if they agree to Shinhan Card marketing and credit limit increases, they can receive an additional 1.0 percentage point per annum.

How to Receive Preferential Interest Rate Benefits?

Woori Bank is also conducting a special promotion limited to 100,000 accounts for the ‘Woori Magic Installment Savings with 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 receive 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/debit cards or bank accounts are registered in 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 large sums of money because deposit limits are set, so even if customers receive all the interest benefits, the amount saved is limited.

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

Due to COVID-19, the temporarily relaxed bank Liquidity Coverage Ratio (LCR) is also approaching normalization, so banks need to increase deposit balances. As of last month, the balance of savings and installment savings in the five major commercial banks was KRW 659.6335 trillion, down about KRW 23 trillion from KRW 682.2184 trillion in the same period last year. The number of savings and installment savings accounts prematurely terminated at the five major banks last year was 8,431,537, which is 14% more than in 2019.

A representative from a commercial bank said, "Even though preferential interest rates are high, deposit limits are set, so losses are minimal, 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."