Put ₩12 million to work for a year. As of July 2026 the five major Korean banks pay 3.20% on a one-year time deposit (yegeum) and 3.45% on a one-year instalment savings account (jeokgeum). The savings rate is 0.25pp higher, yet after tax the deposit earns ₩324,864 and the savings account earns ₩189,716 — the deposit wins by 1.71×. The lower rate wins because of how instalment interest accrues, and the point where that flips is a fixed number.
Results update as you type, and the same total put into the other product is calculated too and compared in the box above. Instalment savings accrue interest separately on each monthly payment, since each one sits for a different number of months; a time deposit earns on the whole sum for the full term. Figures are estimates after interest income tax; actual rates, accrual methods and bonus-rate conditions vary by product.
The run shown here — ₩1M a month, 3.45%, 12 months
The defaults reflect July 2026 market conditions. 3.45% is the top of the one-year savings range after this month's increases at the five major banks, and ₩1 million over 12 months totals ₩12 million — the same sum as the deposit, so the two are directly comparable.
Reading straight off the screen: principal ₩12,000,000, gross interest ₩224,250, tax ₩34,535, after-tax value ₩12,189,716. The effective after-tax yield is 1.58% — less than half the 3.45% on the product's name.
What actually differs
One thing: how long the money sits in the bank. A deposit puts the whole sum in on day one and holds it for all 12 months. With instalment savings only the first payment sits for 12 months; the second sits for 11, the twelfth for one. The average holding period is a little over half, so the interest is a little over half.
| Item | Time deposit at 3.20% | Instalment savings at 3.45% | What it changes |
|---|---|---|---|
| How money goes in | ₩12M at once | ₩1M × 12 | Average holding 12 months vs 6.5 |
| Gross interest | ₩384,000 | ₩224,250 | ₩159,750 apart |
| Interest income tax 15.4% | ₩59,136 | ₩34,535 | Less interest, less tax |
| After-tax interest | ₩324,864 | ₩189,716 | Deposit wins 1.71× |
| Effective after-tax yield | 2.71% | 1.58% | Gap from the headline rate |
| What you need | ₩12M in hand today | ₩1M a month to spare | Whether the choice exists at all |
That last row matters. "Deposits are better" is useless advice to someone without a lump sum. The comparison only bites when you already hold ₩12 million and the higher savings rate is tempting you. In that case, take the deposit.
Where it flips — 1.846×
So how much higher does the savings rate need to be? The answer is exact. For the same total and term, instalment interest is (n+1)/2n of deposit interest — at 12 months that is 13/24, or 54.2%. To overturn it you need the reciprocal: 1.846× the rate.
| Term | Savings ÷ deposit interest | Multiple needed | To beat a 3.20% deposit |
|---|---|---|---|
| 6 months | 58.3% | 1.714× | 5.49% or more |
| 12 months | 54.2% | 1.846× | 5.91% or more |
| 24 months | 52.1% | 1.920× | 6.14% or more |
| 36 months | 51.4% | 1.946× | 6.23% or more |
| 60 months | 50.8% | 1.967× | 6.30% or more |
The best savings rates at major Korean banks in July 2026 sit around 3.45%, nowhere near the 5.91% required. The FSS savings account comparison does list savings bank products at 5–6%, but nearly all cap monthly payments at ₩200,000–300,000, so they cannot absorb ₩12 million. "High-rate" savings accounts usually defend themselves with a payment cap rather than a lower rate. Check the monthly cap before you compare headline rates.
Note also that the required multiple converges towards 2× as the term lengthens. The longer you save, the worse the structural disadvantage — which is why moving to a deposit the moment you have a lump sum is the right reflex.
The formulas, and where they come from
With a as the monthly payment, P as the deposited principal, r as the annual rate (decimal) and n as the number of months:
- Time deposit (simple) — interest = P × r × n ÷ 12
- Instalment savings (simple) — payments sit for n, n−1, …, 1 months, so interest = a × (r ÷ 12) × n(n+1) ÷ 2
- After-tax value — principal + interest × (1 − tax rate). Tax applies to interest only, never to principal.
That instalment interest accrues differently on each payment is set out in a column in Nara Gyeongje, published by Korea's Ministry of Economy and Finance and archived at the KDI Economic Information and Education Center: "only the first ₩1 million earns the full 4% for twelve months. The second month's ₩1 million earns interest for the remaining eleven, the third month's for ten." No public agency page publishes the formula itself, so the expressions above are derived from that description. Cross-check results against the Korea Federation of Savings Banks' savings calculator.
The 15.4% figure is defined on the FSS time deposit comparison page: the after-tax rate is the rate less "interest income withholding tax of 15.4% (income tax 14%, local income tax 1.4%)".
Tax rewrites the headline rate — and 2026 changed the rules
The same 3.20% leaves you with different amounts depending on where it sits. Converted back to a standard-taxed equivalent:
| Tax treatment | After-tax rate | Standard-tax equivalent | After-tax interest on ₩12M |
|---|---|---|---|
| Standard 15.4% | 2.707% | 3.200% (baseline) | ₩324,864 |
| Credit union deposit, 1.4% levy (gross pay ₩70M or less) | 3.155% | 3.730% | ₩378,624 |
| Credit union, 5% (2026, gross pay above ₩70M) | 3.040% | 3.593% | ₩364,800 |
| Credit union, 9% (2027 onward, above ₩70M) | 2.912% | 3.442% | — |
| Tax-exempt savings, 0% | 3.200% | 3.783% | ₩384,000 |
A 3.20% credit union deposit at Saemaul Geumgo, Shinhyup or Nonghyup is worth the same as a 3.730% bank deposit — 0.53pp earned purely through tax, and invisible on any rate table. The cap is ₩30 million per person, and the scheme has been extended through the end of 2028.
But two things changed on 1 January 2026, and most guides online have not caught up.
- Credit union deposits — savers with gross pay above ₩70 million no longer get the 1.4% levy. New accounts opened from 2026 are taxed at 5%, rising to 9% from 2027. (The government's original bill set the threshold at ₩50 million; the National Assembly raised it to ₩70 million. Plenty of published material still quotes the original figure.) Existing accounts and farming or fishing members keep the old treatment.
- Tax-exempt savings — the age-65 route now also requires that you receive the Basic Pension. This applies to accounts opened from 2026; the ₩50 million cap and the other eligible groups (registered disability, basic livelihood recipients and others) are unchanged, and existing accounts keep the exemption to maturity.
Caps and statutory bases for both schemes are listed on the FSS tax-advantaged products page — which has not yet been updated for the 2026 amendments. Confirm the current requirements at the branch before opening an account. The ₩20 million threshold above which financial income is rolled into comprehensive taxation is unchanged for 2026; for how tax works on other products see the guide to ETF taxation in Korea.
What the "savings windmill" actually buys
The pungcha dollligi or "windmill" method means opening a new one-year savings account every month until twelve are running. It is often sold as earning more interest. It does not.
| Item | Windmill (12 accounts) | One account |
|---|---|---|
| Structure | Add a ₩100,000/month one-year account each month | ₩1.2M × 12 |
| Total paid in | ₩14.4M | ₩14.4M |
| Gross interest at 3.45% | ₩269,100 | ₩269,100 |
| After tax | ₩227,659 | ₩227,659 |
| When it finishes | Month 23 | Month 12 |
| Monthly outlay | Ramps from ₩100k to ₩1.2M | ₩1.2M from the start |
| If you need cash mid-way | Break one account | Break the whole thing |
The interest difference is exactly zero. At the same rate, total months-on-deposit is the same however you slice it. But the windmill takes 23 months to collect that same interest. On return alone it loses.
Two things it does buy. The first is a gentler entry: someone who cannot start at ₩1.2 million a month can begin at ₩100,000 and climb over a year. The second is a smaller break unit. If you need ₩1 million in month 20, a single account means breaking ₩12 million and taking the early-termination rate instead of the contracted one; with the windmill you break the one account closest to maturity and the other eleven keep their contracted rates.
In short, the windmill is a cash-flow tactic, not a yield tactic. Chase interest with it and you lose; use it to build the savings habit or to spread early-termination risk and it earns its keep. If you already pay a fixed amount in every month without fail, twelve passbooks buy you nothing.
0.7pp of rate, and the ₩100 million protection ceiling
Where you place the deposit changes the after-tax interest too. On ₩12 million over 12 months:
| Where (July 2026) | Rate | After-tax interest | vs major banks |
|---|---|---|---|
| Five major banks, 1-year deposit | 3.20–3.25% | ₩324,864 | baseline |
| Internet bank (K Bank) | 3.71% | ₩376,639 | +₩51,775 |
| Savings banks, average | 3.91% | ₩396,943 | +₩72,079 |
| Savings banks, highest | 4.41% | ₩447,703 | +₩122,839 |
Rates moved sharply this month. The Bank of Korea raised the base rate from 2.50% to 2.75% on 16 July 2026, its first increase in three and a half years, and the five major banks lifted one-year deposits from the 2.90% range to the 3.20% range between the 20th and the 23rd. Any comparison table written before June showing "2-point-something" deposit rates is already stale. The rate history is on the Bank of Korea base rate page.
Chasing rate into savings banks runs into depositor protection. Since 1 September 2025 the ceiling has been ₩100 million per person per financial institution, covering principal plus eligible interest. Anything still saying ₩50 million predates the change.
The catch is that the ceiling applies to principal plus interest, not principal alone. At 3.91%, a principal of ₩96.23 million reaches ₩100 million at maturity. Deposit a full ₩100 million and the ₩3.91 million of interest sits outside protection. Size each institution's holding on the maturity value. Full details are on the Korea Deposit Insurance Corporation's coverage page.
Which one, for whom
- You already have the lump sum → time deposit. Unless the savings rate exceeds 1.85× the deposit rate (at 12 months), the deposit wins. No such product exists in this market.
- You are still accumulating → instalment savings. Here the comparison is against other savings accounts, not deposits — and check the monthly cap before the headline rate.
- You are eligible for credit union membership and earn ₩70M or less → use the ₩30 million credit union allowance first. Tax alone is worth 0.53pp.
- You are 19–34 and meet the income test → start with the Youth Future Savings account. Government matching and tax exemption change the arithmetic entirely.
- You are not certain you can leave the money alone → shorten the term or split it windmill-style. Early-termination rates are not comparable to contracted ones.
- You are chasing 0.7pp into a savings bank → cap each institution at ₩100 million of maturity value and split the rest.
When this comparison does not hold
- Bonus-rate conditions — salary transfer, card spending or marketing consent add rate on some products, and missing the conditions drops you to the base rate. The calculator uses the single rate you enter.
- Monthly payment caps — most high-rate savings accounts cap payments at ₩200,000–300,000, so anything above that has to go elsewhere at a lower rate.
- Early termination — the early-termination rate applies, not the contracted one. The calculator assumes you hold to maturity.
- Compounding — ordinary Korean deposits and savings accounts are simple-interest. Only choose the monthly-compound option if the product literature says so.
- Prepayment scheduling (seonnap-iyeon) — bringing some payments forward and pushing others back to raise interest works only where the terms allow it, and follows different arithmetic.
- Financial income above ₩20 million — withholding at 15.4% is no longer the end of it; the income is rolled into comprehensive taxation and the net can fall below the table above.
Sources and where to verify
- Financial Supervisory Service — time deposit comparison (after-tax rate and the 15.4% definition)
- Financial Supervisory Service — savings account comparison (check rate and monthly cap together)
- Financial Supervisory Service — tax-advantaged products (₩30M credit union, ₩50M tax-exempt. ⚠️ not yet updated for 2026)
- Korea Deposit Insurance Corporation — coverage limits (₩100 million since 1 September 2025)
- Bank of Korea — base rate history (2.75% from 16 July 2026)
- KDI Economic Information and Education Center — why instalment interest differs by payment
Once you have a lump sum, the interest calculator covers simple versus compound, and the case for moving beyond deposits is in what compounding looks like over twenty years. If you also carry debt, put the rates in the loan interest calculator next to the deposit rates here. Other tools are grouped by situation in the calculator hub.
Rates age fastest here. The figures come from the five major banks' postings of 20–23 July 2026 and savings bank averages for the same month; the tax rules are as of July 2026. The structural gap between deposits and instalment savings — 1.846× at twelve months — holds as rates move, but headline rates and eligibility should be re-checked when you open the account. The 2026 changes to credit union and tax-exempt savings were confirmed through tax-trade press and bank notices; the responsible ministries' own pages could not be reached to cross-check. Written as of July 2026.
