"Banks Roll Out 'High-Interest Specials' Offering Up to 7-13% a Year: 'Why Not Choose Savings Over Stocks?'"

Declining Popularity of Installment Savings

Banks Turn to 'High-Interest Promotions' to Compete

Installment Savings Balances Drop by Nearly 2 Trillion Won in July Alone

Appeal of Installment Savings Fades as Investors Hold More 'Stand

The popularity of regular installment savings accounts, which have long been a leading product for raising a substantial sum, is waning. In response, commercial banks are consecutively introducing high-interest installment savings products as a breakthrough to attract customers.

According to financial industry data on August 27, as of August 24, the balance of regular installment savings accounts at the five major banks (Shinhan, KB Kookmin, Hana, Woori, and NH Nonghyup) was 44.7921 trillion won. Throughout this year, the balance had been maintained in the 46 trillion won range, but from the end of June, when it stood at 46.9202 trillion won, it dropped to 45.0023 trillion won at the end of last month—a decrease of 1.9179 trillion won in just one month.

Installment savings products have been perceived as a financial tool for building up a lump-sum fund, as they allow a fixed amount to be deposited each month for a specified period, with both principal and interest paid at maturity. However, if terminated before maturity, the interest rate drops significantly, so the funds are categorized as “locked-in money.” This means they cannot be readily accessed when needed. With increasing volatility in the stock market, the appeal of installment savings has diminished among individual investors seeking to maintain “standby funds” that can be quickly deployed into stocks at any time.

To break through this situation, commercial banks have been launching high-interest installment savings products. On August 21, KB Kookmin Bank launched the "KB Card Sue-Dam Installment Savings" product, which offers a maximum annual interest rate of 12.0%. KB Kookmin Card’s usage history and other bank transaction records are reflected as preferred interest rate conditions. The base interest rate is 2.0% per annum, but an additional 6.0 percentage points is available for credit card usage, 2.0 percentage points for maintaining a certain average balance, and 2.0 percentage points for first-time salary transfers, all on an annual basis. Sales are limited to 100,000 accounts.

Shinhan Bank also launched the "Shinhan Savings 9 Steps" product, a 1-year free deposit installment savings with a maximum annual interest rate of 9.0%, on August 14. Preferred interest rate benefits are provided to those making their first savings account transaction with Shinhan Bank or to customers who use Shinhan Cards. The base interest rate is 3.0% per annum. If a customer did not hold any Shinhan Bank savings or installment products, including housing subscription accounts, for the previous six months, an additional 5.0 percentage points are offered. Meeting Shinhan Card spending requirements for at least three months adds another 2.0 percentage points. Sales are limited to 200,000 accounts until September 30.

Woori Bank introduced “Woori Heart-Thumping Lucky Installment Savings” last month, and this month released “Woori’s Wish Installment Savings.” The Woori Heart-Thumping Lucky Installment Savings account allows free deposits of up to 500,000 won per month for six months, with preferred interest rates provided through monthly “Lucky Card” prize draws. If a customer wins all five cards, an additional 10.0 percentage points are added for a maximum annual rate of 13.0%, with each card offering an additional 2.0 percentage points.

The Woori’s Wish Installment Savings, available in six- and twelve-month maturities, has base interest rates of 4.29% for six months and 3.0% for twelve months. An additional 2.0 percentage points are added for participating in the “Leave Your Wish” program, and another 2.0 percentage points are added if the customer held no Woori Bank deposits or installment accounts in the previous six months. Thus, the six-month product offers a maximum annual rate of 8.29%, and the twelve-month product a maximum of 7.0%.

Hana Bank is offering the “From Today, Hana Installment Savings” product, which has a maximum annual rate of 7.7%, through December 31 this year. The base interest rate is 2.0% per annum, with an additional 4.7 percentage points if no Hana Bank products were held in the past six months, and 0.5 percentage points each for using auto-transfer and consenting to marketing communications.

NH Nonghyup Bank launched the “NH Nongsim Cheonsim Installment Savings” account, offering a maximum annual rate of 8.15%, on August 11, and sold 10,000 accounts in two days. The bank also promoted the product actively, including with Kang Hodong, Chairman of the National Agricultural Cooperative Federation, joining as the first customer.

The primary targets for these savings products are inactive or new customers. Recently launched products especially aim to attract funds that have lost a destination amid market volatility. Once funds are deposited in an installment savings account, they are likely to stay until maturity, and after maturity may be transferred to other products at the same bank—allowing banks to benefit from the so-called “lock-in effect.”

An official from one of the commercial banks explained, “We have analyzed that many customers moved into equities during the first half of the year. Even if it means providing higher interest rates, we want to increase the number of active customers. When we set the limit on the number of accounts, we calculated the number needed to attract customers.”

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