Banks offer high-interest deposit products, but have complicated preferential terms

The Yeouido financial district in Seoul. (Yonhap)

SEOUL, Sep 15 (Korea Bizwire)Against the backdrop of the rising interest rate trend, South Korean banks have launched a series of high-interest installment deposit and savings products.

These products, however, have complicated preferential terms, which make it difficult for depositors to benefit from the highest interest rate.

Welcome Savings Bank, for example, launched a 12-month short-term deposit product with a prime interest rate ranging from 1% to 8%.

The preferential interest rate is determined by the number of steps taken by depositors during the term of the contract.

If the number of steps reaches 1 million, depositors can benefit from a preferential interest rate of 1%. Depositors who take 5 million steps are eligible for a preferential interest rate of 8%.

In other words, depositors must walk 15,000 steps a day to receive an interest rate of 8%.

Shinhan Bank, together with food and beverage company Hy, introduced a new installment savings product offering an annual interest rate of up to 11%.

To benefit from a preferential interest rate of 1%, depositors must not have had any other installment savings account for three months before subscribing to the new product.

To get an additional eight percent interest rate, they must spend more than 200,000 won (US$143) in Hy’s online shopping mall at least five working days before the due date.

Industry watchers have said that the main reason banks offer high interest rate products with complicated preferential terms is to narrow the spread between the lending rate and the deposit rate by temporarily raising the average interest rate on deposits.

JS Shin ([email protected])

Stephen V. Lee