Interest Rates Keep Falling... Savings Products Offering 'High Yields' Just for Depositing Money [Financial Microscope]

Shinhan Bank's "Moduui Savings"
K Bank's "Curious Savings"
For deposits, Monimo KB Daily Interest Account
and Internet Bank Services Recommended

In the first quarter of this year, South Korea's economic growth rate contracted, leading to expectations that the pace of base rate cuts to stimulate the economy will accelerate. Due to the effects of previous rate cuts, banks have already begun lowering interest rates on deposit and savings products. However, even during this period of low interest rates, banks have introduced high-interest deposit and savings products. The primary purpose is to retain existing customers or attract new ones. For consumers, these products are suitable for gradually growing small amounts of funds for investment purposes.

According to the financial sector on April 30, banks have recently been lowering interest rates on deposit and savings products. Last month, NongHyup Bank reduced the base rates on five major time deposit products by 0.2 to 0.3 percentage points, depending on the maturity. Starting from April 1, Shinhan Bank also lowered rates on 14 time deposit products by 0.1 to 0.25 percentage points in a similar manner. Woori Bank reduced its rates by 0.1 to 0.25 percentage points as well. Internet banks are following suit: on April 23, KakaoBank lowered its one-year time deposit rate from 2.9% to 2.8%. Savings account rates have also decreased. According to the Korea Federation of Banks' consumer portal, the base rates for 12-month savings accounts at the five major banks (KB Kookmin, Shinhan, Hana, Woori, and NH NongHyup) now range from 2.1% to 3.15%. This is lower than last month's average rates, which ranged from 2.44% to 3.42%.

This trend is expected to continue for the time being. On April 17, the Bank of Korea's Monetary Policy Board kept the base rate unchanged at 2.75% per annum. In addition, South Korea's economic growth rate in the first quarter declined by 0.2% compared to the previous quarter. As a result, it is expected that the government will seek to stimulate the economy through rate cuts in order to boost growth. There were initial expectations that the base rate would be lowered to 2% through three 0.25% cuts this year, but some forecasts now predict that the rate could ultimately reach 1.5% next year, following a continued easing stance. When the base rate falls, banks' funding costs (market rates) also decline, leading them to lower their own rates. In other words, banks are likely to gradually reduce their rates through early next year.

Nevertheless, banks are offering high-interest deposit and savings products to attract new subscribers or retain existing customers. Although these products may appear to be "bait products" due to their relatively low deposit limits despite the high interest rates, they are actually quite simple to use?just deposit money into the account to receive the interest rate?making them suitable for gradually growing small amounts of capital.

Among savings products, Shinhan Bank's "Moduui Savings" stands out. This product, launched for customers who transfer income such as salaried workers, self-employed individuals, and National Pension recipients, is limited to 300,000 accounts, with a maximum monthly deposit limit of 300,000 won. The subscription period is either 6 months or 12 months, with a maximum interest rate of 6.5% per annum for 6 months and 7% per annum for 12 months. Preferential rates are applied if the customer deposits income for more than three months into a Shinhan Bank account under their name (1.5%), maintains Shinhan Card payment records for more than three months in their own Shinhan Bank account (0.5%), and meets the first income deposit condition (2.5%).

Among internet banks, K Bank offers the "Curious Savings" product. The daily deposit amount ranges from a minimum of 100 won to a maximum of 50,000 won. If the customer receives a random interest rate of 0.1% to 1% per annum every day for 31 consecutive days, they can receive up to 7.2% per annum, including the base rate of 1.2% per annum. This is the highest rate among one-month maturity savings products in the banking sector. Season 3 of this service will launch on May 12. Seasons 1 and 2 featured popular characters such as DinoTang's Quokka and friends. This season, K Bank is collaborating with Disney Korea to feature stories using popular Disney characters.

Some demand deposit accounts, which allow customers to deposit and withdraw funds at any time, also offer relatively high interest rates. On April 21, KB Kookmin Bank officially launched the "Monimo KB Daily Interest Account" in collaboration with Samsung Financial Networks' financial platform "Monimo." This account can only be opened through the Monimo application and offers up to 4% per annum interest on daily balances up to 2 million won. The base rate is 0.1%, with an additional 3.5 percentage points for first-time subscribers, up to 0.3 percentage points for registering automatic transfers, and 0.1 percentage points for agreeing to marketing communications. By using the daily interest service, customers can earn interest even if they deposit funds for just one day. K Bank's "Challenge Box" also offers a maximum rate of 3.5%; customers can set their own goals and amounts, and receive preferential rates if they succeed in meeting their target amount through weekly automatic transfers or other methods.

KakaoBank offers a "Savings Jar" product. Customers can earn up to 6% interest and save spare change from their account up to a limit of 100,000 won. On April 29, a new feature was added, allowing customers to use the amount saved in the Savings Jar to purchase brand mobile coupons for cafes, restaurants, and more. Cashback received from coupon purchases can also be saved in the Savings Jar.