Savings Accounts in Korea: Yegeum, Jeokgeum and What the Advertised Rate Means

Two products, often confused

Korean banks market two savings structures, and the difference matters more than the rate.

Yegeum (예금) — a term deposit. You place a lump sum for a fixed period, typically 6 to 36 months, and receive interest at maturity. Withdraw early and the rate drops sharply to a penalty rate.

Jeokgeum (적금) — an instalment savings plan. You pay a fixed amount every month for the term, and receive principal plus interest at maturity.

Jeokgeum rates are advertised higher, and this misleads people constantly. The reason is arithmetic: each monthly payment only earns interest for the months remaining. Your first payment earns a full year of interest; your twelfth earns one month. The effective return on the total amount saved is roughly half the headline rate.

A 6% jeokgeum and a 3% yegeum on the same total money end up broadly comparable. Compare the maturity amount, which every bank’s calculator will show, not the advertised percentage.

The headline rate is rarely what you get

Korean savings products advertise a base rate plus preferential rates (umae geumri, 우대금리). The large number in the advertisement is the maximum with every condition met.

Conditions commonly required:

• Salary deposited into the same bank
• A minimum monthly card spend
• Automatic transfers registered
• Marketing consent
• First-time customer at that bank
• Using the bank’s app to open the account

Meeting all of them is often impractical. Read which conditions apply to you and calculate from the rate you will actually qualify for.

Internet-only banks (Kakao Bank, K Bank, Toss Bank) typically advertise higher base rates with fewer conditions, which makes their headline figure more honest. Eligibility for foreign residents has expanded but is not universal — it is easier once your registration card and Korean phone number are established.

The Financial Supervisory Service publishes a comparison of deposit and savings products across institutions, which is the most neutral place to compare.

Tax and protection

Interest is taxed at source Interest income is subject to 15.4% withholding — 14% income tax plus 1.4% local income tax. The bank deducts it before crediting you, so the amount arriving is already net.

Compare products after tax. A rate difference of half a percentage point shrinks once withholding applies.

If your combined interest and dividend income exceeds the annual aggregation threshold, it is added to your other income and taxed progressively through the May global income tax return rather than ending at withholding. For most savers this does not arise, but it is worth knowing if you hold substantial deposits.

Deposit protection Deposits are protected by the Korea Deposit Insurance Corporation up to a statutory limit per person per financial institution, covering principal and interest. Spreading large balances across institutions is the way to stay within it.

The protection limit has been subject to legislative revision, so check the current figure rather than relying on a number from an older source. Note also that not every product at a bank is a protected deposit — investment products are not.

Practical notes for foreign residents

You can open these accounts. Term deposits and instalment savings are available to foreign residents with an alien registration card and a Korean bank account. There is no special restriction on ordinary savings products.

Match the term to your stay. A 24-month jeokgeum makes little sense if your visa expires in 14 months. Early termination drops you to a penalty rate that can wipe out most of the benefit. Choose a term you will complete.

Before leaving Korea

• Let products mature if the timing works, or accept the penalty rate knowingly
• Close accounts properly rather than leaving them dormant
• Sequence closures after any national pension lump-sum refund and final tax settlement, both of which need a live account to pay into

Preferential rate conditions are worth checking against your reality. A condition requiring a Korean credit card with monthly spend is not useful if you are unlikely to be approved for one. Choose the product whose achievable rate is highest, not the one whose maximum is.

This article does not recommend any particular product or institution.