Installment savings accounts lose appeal as investors pursue higher returns

By Lee Yeon-woo

Once considered a starting point for building assets, installment savings accounts are increasingly falling out of favor with customers.

Although these accounts promise high interest rates, much like add-on certificates of deposit in the U.S., they often come with terms, making customers feel the returns aren't worth the effort. The recent surge in retail investing in stock and cryptocurrency markets has also contributed to this trend.

According to Korea's five major banks — KB Kookmin, Shinhan, Hana, Woori and NH NongHyup — the total balance in these accounts stood at 39.54 trillion won ($27.5 billion) in November, marking a decline of more than 12 percent compared to the same period last year. In contrast, during the same period, the balance of deposits increased to 948 trillion won, growing by more than 9 percent from 868 trillion won.

This was the first decrease in three years. From 2021 to 2023, the balance of installment savings accounts increased steadily each November, rising from 35 trillion won to 45 trillion won. Interest rate hikes, which caused a downturn in the stock market, had driven investors toward savings accounts and deposits.

Market watchers attribute the decline partly to the Bank of Korea moving into a cycle of rate cuts, which has encouraged a surge in retail investment. At the same time, many have turned to the crypto market, driven by Donald Trump’s presidential victory in the United States and market optimism. According to Coinbase, a major cryptocurrency exchange, the price of Bitcoin recorded $105,087 on Sunday, surpassing the $105,000 mark for the first time.

Others point to the complicated criteria for earning higher interest rates. While banks advertise rates significantly above the policy rate, customers often must meet various requirements — such as issuing a new credit card, consenting to receive the bank's marketing information or participating in bank promotions — to qualify for those advertised rates.