Banks Join the Rush to End Interest to Small Depositors

An increasing number of commercial banks are not paying interest to customers whose account balances are less than a required minimum.

Hanvit Bank and Seoul Bank both announced that they will introduce non-interest bearing bank accounts starting this month.

From March 18, Hanvit Bank will not pay interest to customers that have less than 500,000 won ($391) balance in their demand deposits and savings accounts. The bank official said that interest will be accrued on a daily balance basis.

For instance, if a customer continuously maintains a balance in their bank accounts higher than 500,000 won, the bank will pay interest. But if a customer's balance dips below 500,000 won for few days, then no interest will be paid for those few days.

Seoul Bank will also adopt this non-interest bearing system beginning March 19, but it will be applied only to savings account holders . Unlike Hanvit Bank, Seoul Bank will pay interest to its customers based on their three-month average balance.

If the average balance in a savings account is less than 200,000 won, then the bank will not pay interest to customers for the three-month period.

KorAm Bank also plans to adopt a similar system starting in April and it is most likely to follow a system similar to Hanvit Bank by offering daily accrued interest only for days in which the minimum balance is above a limit yet to be announced

Kookmin Bank and H&CB are awaiting Financial Supervisory Service approval of their plans, but want to begin the system in April.

"We decided to adopt this system because the cost of maintaining small bank deposits outweigh the profits generated," said a Kookmin Bank official. "But this will not apply to people who are over 65 years old and to minors, persons who are less than 20 years old," the official said.

by Oh Jung-hee