Citibank’s (NYSE: C) Korean Arm, Citibank Korea, is offering a new timed deposit account which has a variable interest rate that raises and lowers every three months.
Typically consumers think of a certificate of deposit as an investment with a fixed interest rate over whatever term the customer chooses to lock in at. This makes certificates of deposit excellent investments when interest rates are going down, but less desirable investment products when interest rates are going up.
Citibank Korea is hoping to address this problem by providing their customers a one-year deposit account that increases the amount of interest which customers receive over time and gives customers an incentive to keep their money in the deposit account.
The term “Step-Up Deposit” that Citibank Korea is using is based on the fact that the interest rate that the account offers rises in steps. Citibank bills the product as an “excellent choice for customers who are not putting money into deposit accounts in anticipation for rate hike or for those who don’t want to lock in their money in preparation for future needs.”
On average, the account provides a 4.7% rate of return pre-tax, much better than what customers in the western world are receiving. The minimum to open one of these stepped-rate deposit accounts is 1 million Won, or about $850.00 in US Dollars.
