"Savings Interest Rates Up to 4%"... Internet Banks Follow Suit as Commercial Banks Raise Rates

[Asia Economy Reporter Buaeri] As major domestic commercial banks raised deposit and savings interest rates by nearly 1 percentage point last month, internet-only banks have also strengthened their interest rate competitiveness to retain users.

According to KakaoBank on the 7th, from the 5th, deposit and savings interest rates were raised by up to 0.8 percentage points, while loan interest rates were lowered by up to 0.45 percentage points.

With this increase, the basic interest rate for the 'Parking Account' Safe Box became 2% per annum. The maximum deposit limit is 100 million KRW, and one account can be opened per deposit and withdrawal account. It offers a 2% annual interest rate even if deposited for just one day.

The 26-week savings plan interest rate was raised by 0.5 percentage points. If automatic transfers are successfully made for 26 weeks, a preferential interest rate of 0.5 percentage points is applied, allowing an annual interest rate of 3.5%.

KakaoBank raised fixed deposit interest rates by 0.5 to 0.6 percentage points and uniformly increased flexible savings interest rates by 0.6 percentage points.

For fixed deposits, interest rates for terms of one year or more were raised by 0.6 percentage points. The one-year fixed deposit interest rate is 3.1% per annum, and the three-year fixed deposit rate is 3.6% per annum.

Flexible savings accounts apply a 0.2 percentage point preferential interest rate when automatic transfers are set up. With the preferential rate, the one-year flexible savings account offers up to 3.5% per annum, and the three-year flexible savings account offers up to 4% per annum.

KakaoBank's decision is interpreted as a strategy to retain users who might 'transfer back' to commercial banks. As commercial banks' interest rates rise, large sums of money continue to flow into banks.

As of the end of last month, the deposit and savings balances of the five major commercial banks?KB Kookmin, Shinhan, Hana, Woori, and NH Nonghyup?totaled 750.5658 trillion KRW, an increase of over 28 trillion KRW compared to the previous month. Meanwhile, KakaoBank's deposit balance as of the end of July decreased by 527.4 billion KRW from the previous month to 32.6534 trillion KRW.

K Bank is attracting users by conducting several special sales of high-interest deposit products. In June, it held two events applying a 5% annual interest rate for the 'CodeK Flexible Savings' (3 years), both of which sold out. Since last month, it has raised the interest rates of 'Main Transaction Preferential Flexible Savings' and 'CodeK Flexible Savings' by 0.4 to 0.6 percentage points annually.

The 'Main Transaction Preferential Flexible Savings' offers up to 3.2% per annum for a one-year subscription period if preferential conditions are met, up to 3.4% per annum for two years or more but less than three years, and up to 3.7% per annum for three years.

The 'CodeK Flexible Savings' is a product that offers the highest interest rate available to anyone without any conditions. The interest rate is 2.9% per annum for one year, 3.1% per annum for two years or more but less than three years, and 3.4% per annum for three years.