The names sound alike but the jobs differ. Why choosing on the headline rate alone loses money.
A term deposit takes a lump sum up front and holds it to maturity. A savings plan takes a fixed amount each month and pays out a lump sum at the end. Money already in hand goes to a deposit; money you will accumulate from now goes to a plan. The question is not which is better, but what state your money is in today.
Because you pay in monthly, only the first month's money earns twelve months of interest and the last month's earns one. A 5% annual savings plan therefore pays roughly what a 2.7% deposit on the same total would. Judging by the headline rate alone leads to disappointment.
15.4% tax comes off the interest, so what you receive is less than advertised. High-rate products often require card spending or salary transfer. Miss the conditions and you get only the base rate — check that they fit your life before signing.
Breaking before maturity replaces the agreed rate with a very low early-withdrawal rate. Only commit money you can surely leave until the end, and keep an emergency fund separately. Splitting into several plans with staggered terms means you break only one if you must.
Putting a lump sum into a single product means breaking all of it even when you need only part. A common alternative is to split the money and open deposits with different terms — say three, six and twelve months. Something matures every few months, so less money is locked up, and when rates change you can move portions at a time. The same logic applies to savings plans: several small ones instead of one big one means you only cancel one if something comes up. Money left after maturity often earns a much lower post-maturity rate, so put the dates in your calendar.
The same kind of deposit carries different rates and protection depending on whether it sits with a bank, a savings bank, or a mutual credit cooperative. In Korea, bank and savings bank deposits are covered by the Korea Deposit Insurance Corporation, while cooperatives such as credit unions and community credit cooperatives are protected by their own central funds. If a high rate tempts you to place a large sum in one place, check that it fits within the protection limit. The limit is counted per institution, principal plus interest, and has been changed by law before, so confirm the figure in force when you sign up. Some schemes, like member deposits at cooperatives, carry lighter tax, but they come with eligibility, cap and deadline conditions that can change.
The top rate in an advert usually assumes every bonus condition is met. Before signing up, check in turn the base rate, whether you can really meet the bonus conditions, whether the monthly cap and term fit your plan, and the early-cancellation and post-maturity rates. If the bonus requires a certain amount of credit card spending, make sure the extra spending isn't larger than the extra interest. The most accurate way to know the payout is to run the after-tax figure through a calculator yourself. This guide explains product structure and does not recommend any product.
Which product fits depends on what the money is for. For money you'll use within a year, a deposit or savings plan with a matching term works well; money with no set date belongs in an instant-access account. For money needed in a few years, splitting maturities keeps you flexible if rates change.