Stash your cash
An installment account is an interest-earning account into which you can save a little bit at a time.
The first thing you need to decide in selecting your installment account is how often you want to deposit into it. You can choose to either make regular, automatic deposits for a designated amount each month, or you can freely make installment deposits whenever you have time and extra cash.
You can usually earn slightly higher interest if you set up regular, automatic deposits. Your bank will have many types of installment accounts for you to choose from. You can open a Korean won installment account, foreign currency installment account or a compound interest installment account.
One installment account usually of interest to foreign customers is the “Home Buyer’s Installment Account.” It was created by the Ministry of Land, Transport and Maritime Affairs in 2009 to support anyone interested in participating in Korea’s Housing Lottery. Opening this account makes the account holder automatically eligible to participate in the housing lottery for the opportunity to purchase high-demand apartments that are currently being built in Korea. The hope is that the money saved in this account will be used to buy homes, although it is not necessary to use your savings to buy a home.
The Home Buyer’s Installment Account is available at five local banks in Korea: Shinhan Bank, Woori Bank, Hana Bank, Nonghyup and Industrial Bank of Korea. It is available to international residents in Korea who have a valid Alien Registration Card.
This appeals to foreign customers, because there is no set maturity date. This means that there is absolutely no risk of ever losing the interest rate promised to you on the day that you opened the account.
However, you must open and close this account in person at your local bank branch. It is not possible to open or close this account online.
Unlike the Home Buyer’s Installment Account, most other installment accounts have a fixed maturity date — usually six months to five years from the date you opened the account.
One interesting thing about installment accounts in Korea is that if you have to cancel the account before the maturity date, there is no penalty. Of course, you may not earn all of the interest that was promised to you on the day that you opened your account, but your principal is secured and there are no additional fees for early cancellation.
The interest you earn on any kind of installment account is taxed by the National Tax Service (www.nts.go.kr) — just the interest is taxed though, not the principal.
You should ask the teller to apply these special tax rates at the time of opening the account — otherwise only the regular rate will apply. An installment account is a great way to budget and save. Check your bank’s website or talk to your teller about setting one up.
Shinhan Bank Foreign Customer Department
*The preferential rate can be applied to your account if you are at least 20 years old and the account has at least a one-year maturity and a balance of less than or equal to 10 million KRW. Ask your teller how you can benefit from this rate.
**People who are disabled and/or over 60 years of age are eligiblefor tax benefits on a total amount of 60 million KRW (including the Preferential Rate and Exemption Rate).