Since 2024, domestic bank deposit rates have entered a downward trend, reaching a historic low. The trend of declining deposit rates has not changed. For example, the 3-year deposit rate was 3.05% before, but now it has dropped to 1.55%. If you deposit 100,000 in the bank, you will earn 1,500 less interest each year on average.
Although bank deposit rates have dropped significantly, many savers still prefer to store money in the bank, mainly to deal with unexpected events such as unemployment, illness, children’s education, future retirement, and down payments for homes. Additionally, due to the risks involved with the stock market, funds, and bank financial products, keeping money in the bank guarantees safety.
Given the current market situation, industry insiders are advising that from September, there will be 4 changes in the banking deposit market. For families with savings over 500,000, it is important to take action and do these 3 things early. Let’s take a closer look:
Change 1: Difficulty in withdrawing large amounts of cash is increasing
In the past, savers only needed to make an appointment a day in advance to withdraw more than 50,000. However, now they need to make an appointment 2-3 days in advance. Additionally, when withdrawing large amounts of cash, they must specify the purpose (such as for medical expenses, tuition, or renovation). Clearly, the difficulty in withdrawing large amounts of cash is increasing. The reason behind this is to combat fraud, money laundering, and illegal transactions. Therefore, savers should try to use transfers as an alternative, avoiding unnecessary trouble.
Change 2: Bank deposit rates are showing an inverted yield curve
Now, many banks are showing an inverted yield curve in their deposit rates. For example, the 3-year fixed deposit rate is 1.55%, while the 5-year fixed deposit rate is only 1.50%. This is mainly because most savers prefer 3-year fixed deposits. Banks have raised the rates for 3-year deposits to attract savings. It is recommended that savers choose to deposit for 3 years, as they offer higher rates and more flexibility than 5-year deposits.
Change 3: Risk of bankruptcy or dissolution of small and medium-sized banks is increasing
In recent years, the risk of bankruptcy or dissolution of small and medium-sized banks has been rising. Earlier, two banks, Liao Yang Rural Commercial Bank and Taizi River Village Bank, announced their bankruptcy. Additionally, in 2024, 105 banks in total have been approved for dissolution. In the future, more small and medium-sized banks are likely to announce bankruptcy or dissolution due to poor management.
It is advised that savers store their money in joint-stock banks, as they are safer than small and medium-sized banks, and offer better deposit rates than the six major state-owned banks.
Change 4: High-interest deposit gathering risks are increasing
Currently, many small and medium-sized banks are using high-interest deposit gathering methods to attract funds. “High-interest deposit gathering” means that the deposit rates of these banks are significantly higher than the general market rate. For example, the 3-year deposit rate at a state-owned bank is 1.50%, but some small and medium-sized banks offer a rate of 2.5%, which is almost 1 percentage point higher than state-owned banks.
Savers must be cautious when encountering high-interest deposit gathering situations. After gathering deposits at high interest, small and medium-sized banks will invest the funds in high-yield projects, which come with high risks. If loans cannot be recovered, the liquidity of the bank may dry up, affecting depositors’ savings.
Given the above 4 changes, families with savings over 500,000 are advised to take the following 3 actions:
First, before depositing money, savers must check if the bank has a “deposit insurance label”. If it does, they can deposit confidently. According to regulations, if a bank with deposit insurance goes bankrupt, depositors will receive full compensation for savings and interest, as long as it is under 500,000. If the total amount exceeds 500,000, compensation will be paid based on a certain percentage.
Second, diversify deposits and ensure that no single deposit exceeds 500,000. Savers should not store all their money in one bank, but spread it across 2-3 banks, with no more than 500,000 in each bank. This way, even if a bank goes bankrupt, the safety of the depositors’ savings will be guaranteed.
Third, savers need to learn to “wait for the right time” to save money, as interest rates can be higher if you are patient. Usually, banks raise deposit rates around the end of the year and before the Spring Festival, as that is when they expect more funds to be available.
Additionally, large-amount certificates of deposit are not always available. The frequency of banks offering large-amount certificates is decreasing, so savers need to wait for the opportunity to buy them. Therefore, if savers want to secure higher deposit rates, patience is key.
