Korean Banks Compete Over CD Products

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Korean banks are offering competitive CD products. A customer at CBB Bank is learning about its new CD promotion.

As competition among Korean banks to attract more funds is only heating up further, certificate of deposits (CD) products are also becoming more creative.

The CD promotions have been rare for a while, but Korean banks have begun offering a diverse set of CD products as the standard interest rate rose to 0.75 percent recently.

The rate is expected to increase over two more occasions this year, prompting Korean banks to strategize ways to attract more customers by utilizing it. In essence, the Korean banks are looking to secure the biggest margin possible by fixating the new CD product for the next year or two before the standard rate increases further.

In addition, those familiar with the financial industry added that banks are looking to improve their loan-deposit ratio by attracting more funds. The interest rate on CDs at Koreans banks are relatively higher than the ones offered by other banks.

The Korean banks currently offering the highest interest rates are CBB Bank and Woori America Bank. At CBB Bank, at 18-month CD product is rated at 1.5 percent, while the 12-month product is at 1.4 percent. However, the minimum deposit is $100,000. The current promotion will last until July 31. However, the deadline could come sooner, while CBB Bank is also requiring new customers to open a checking account.

Woori America’s CD product has an interest rate equivalent to CBB Bank’s 1.5 percent, but its duration is shorter by three months at just 15 months. The minimum deposit is also rated lower at $1,000, while there’s no maximum amount. Another notable element at Woori America is its Happy Club package. The monthly savings program offers an APY of 1.5 percent for 12 months and 1.8 percent for 24 months. The minimum starting deposit is $1,000. The promotion lasts until the end of next month.

Hanmi Bank is also running a special CD promotion at the moment. For a 12-month program, a starting deposit of $10,000 to $100,000 will grant an interest rate of 1.25 percent, while a deposit between $100,000 and $250,000 will earn 1.35 percent.

Customers seeking a short-term program are suitable for Bank of Hope’s six-month CD. Bank of Hope is offering a 1.05 percent interest rate for its six-month program, while a 12-month program will grant a 1.25 percent return. However, the deal is limited to new customers only. The minimum deposit is $1,000. The maximum is set at $250,000.

However, sources close to the banking industry advise that customers should always be mindful of the various deals’ specifics, including termination fee, restrictions and additional fees. Also, it is important for customers to choose when to sign up for a CD offer as the interest rate is expected to rise over two separate occasions this year.

Meanwhile, the Federal Deposit Insurance Corporation released a research last week that the CD deals nationwide are offering an average of 0.14 percent on six-month, 0.24 percent on 12-month and 0.39 percent on 24-month deals if the starting deposit is at least $100,000.

By Sungcheol Jin