As the stock market booms, more investors are pulling money out of bank time and savings deposits and putting it into flexible high-yield savings accounts with free access to use for stock investing. To retain the funds flowing out, banks are rolling out flexible savings accounts with annual rates in the 3% to 4% range.
A flexible high-yield savings account is an account where you park money for a short period, like parking a car, and withdraw it anytime. Unlike time deposits, which incur losses from early termination if you do not reach maturity, you can put in and take out money anytime while earning solid interest for the period entrusted. From a bank's perspective, it is advantageous for attracting short-term funds.
According to the financial sector on the 7th, IBK Bank launched the IBK Dependable Account earlier this month with a maximum annual interest rate of 3.1%. Limited to the first 50,000 accounts, this flexible savings account pays interest daily even if deposits are kept for just one day. There are also high-yield flexible accounts in the 4% range. KB Kookmin Bank's Monimo KB Daily Interest Account and Woori Bank's Npay Money Woori Account, offered in partnership with Naver Financial, provide a maximum annual rate of 4.0%.
Hana Bank also rolled out a stock market–tailored product last month. The "All-in-one Hana Account," which lets you use banking and securities services at once, offers an annual rate of 2.5% on deposits of up to 2 million won. The product's key feature is the ability to trade domestic and overseas stocks directly from a bank checking account without transferring to a securities account.
Flexible high-yield savings account rates drew investors last year with levels in the 7% to 8% range but have continued to fall this year due to rate cuts. In January, according to the Korea Federation of Banks, the average rate of 39 flexible savings accounts sold nationwide was only 2.03% per year. Even then, excluding KakaoBank's "Coin Box," which paid up to 8.0% a year, and Kbank's group account "Moim Fee Plus," most were in the 1% range.
The return of flexible high-interest savings accounts is due to a decline in demand deposits. According to the financial sector, demand deposits, including money market deposit accounts (MMDA), at the five major commercial banks—KB Kookmin, Shinhan, Woori, Hana, and NH Nonghyup—totaled 647.8564 trillion won as of the 31st of last month. That was down 21.8674 trillion won in a month from 669.7238 trillion won at the end of September.
Even amid a rate-cutting trend, banks are raising flexible savings account rates largely as a "fund defense" to hold on to money that might flow to investment markets. The judgment is that tying customers' money to their own asset even briefly is better than taking a loss. Also, flexible savings accounts serve more as a tool to expand customer touchpoints—such as attracting new customers or prompting app installations—than for profitability, and banks can also secure customer data through funds that flow in temporarily.
By contrast, savings banks without lending capacity have cut flexible savings account rates. Savings bank flexible accounts previously recruited customers by offering higher rates than commercial banks, but recent lending regulations have reduced their lending capacity, preventing them from raising rates. OK Savings Bank lowered the product rate on its flexible savings account from 2.3% to 2.1%, and Pepper Savings Bank cut it from 1.8% to 1.2%.