Looking for low-risk returns that beat the sub-1% savings rates? Now is a good time to shop around for a good deal.
With rapid lending growth and the government's plan to borrow 2 trillion baht to fund infrastructure development over the next seven years, both commercial and state-owned lenders have jumped on the bandwagon to attract deposits by offering attractive interest rates.
When a depositor wants to open an account, the interest rate is the main but not the only factor to take into consideration. The creditability of banks and types of accounts, and above all the fine print, should also be on a customer's checklist.
Despite various factors influencing decisions, K-Expert, the personal finance advisory unit of Kasikornbank, has provided some guidelines on selecting deposit accounts.
Maturity is the most important factor. Depositors should select the term that matches their spending plans. Choosing too long a period for a fixed deposit could create a liquidity crunch that may lead to other financial problems.
Depositors are recommended not to put money in deposit accounts longer than 12 months as economists expect interest rates to make a U-turn and start to rise in the second half of next year when the US Federal Reserve starts normalising its rock-bottom rate.
"Savers who have surplus money can choose fixed-deposit packages with at least a six-month term," said Chatpong Watanajiraj, head of Kasikornbank's advisory department.
Deposit conditions are another key factor on which savers should do their homework before deciding to open an account. Typically, special deposit accounts come with strings attached, so customers could end up getting not-so-special or even no returns if they breach any conditions.
The rule of thumb for deposit packages is the less the flexibility and convenience, the higher the interest rate.
Depositors who put money in regular fixed-deposit accounts should be well aware that their interest is subject to 15% withholding tax.
For those who do not want to pay the tax, they can plough money into special time-deposit accounts, which always require deposits to maintain a minimum amount of at least 500,000 to 1 million baht for a specified period.
For monthly deposit accounts, customers must deposit a certain amount each month for a specified period in return for 3-4% interest rates. Should they fail to follow the requirement, the rates will default to the regular savings rate of 0.75% per year instead.
Mr Chatpong advises that local fixed-income funds that invest in foreign banks' deposit accounts for 3-6 months are another investment alternative, yielding higher returns than traditional fixed deposits.
For instance, traditional three-month fixed deposits of large banks offer interest rates of 1.6% to 2% per year, while the three-month fixed-income funds provide a return of 2.75%. However, higher-yielding financial instruments come with a higher risk, so new players should invest in these products only for a short period.
State-owned banks' special deposits are an attractive choice for those who do not mind that they have limited branch networks compared with private banks.
Some people prefer parking money in savings accounts so that they have the flexibility of being able to withdraw cash at any time.
The Depositing in Me by TMB account is interesting. It offers an interest rate of 3% a year for balances of less than 10 million baht and 3.5% for more than 10 million baht, compared with 0.75% offered by regular savings accounts.
Depositors who successfully invite others to open an account will also get 0.25% on top of the product's regular rate for two months. The extra rate will be available until the end of this month. Depositors must manage their banking transactions themselves electronically.
For those who don't want to make internet transactions, Krungsri Mee Tae Dai, a special savings product of Bank of Ayudhya, may catch their eye.
The product offers 2.65% interest a year for deposits of at least 100,000 baht but not exceeding 10 million baht. A minimum deposit of 500,000 baht is required open the account. Customers can transfer or withdraw money twice a month free of charge, but they are levied 50 baht for extra transactions.
Depositors should have few concerns about banks' creditworthiness as banks have far higher capital adequacy ratios than the minimum requirement of the Bank of Thailand at 8.5% of risk-weighted assets. Moreover, the Deposit Protection Agency will provide protection for 50 million baht in each bank account until Aug 10, 2015.