Change it or not?
Salaried workers are considering whether to change their salary accounts in the wake of the introduction this month of the CMA credit card, a combination of a cash management accounts with high interest and a credit card.
Securities companies will provide even a small fund payment service in July, which is expected to move short-term deposits at banks to CMAs.
○ CMAs dramatic change
People were unable to withdraw or deposit money from CMAs on weekends and holidays, and unable to wire money to a credit card or insurance company the securities companies had no ties with. A CMA check card could be used only when there was money in the account, and installment transactions were impossible.
With the new CMA credit card, however, users can make a purchase with insufficient cash in the account and make an installment transaction. Once the small money payment service begins next month, customers can use services such as stock investment, automatic payment service, money wiring and cash withdrawals and deposits at cash machines without a time limit. In other words, all bank transactions will become possible with CMAs.
Securities companies have begun aggressive marketing of the CMA credit card. A CMA itself is hardly profitable for such corporations, but they could attract money in the accounts to other products such as funds or equity linked security.
Park Eun-joon, researcher at Shinyoung Securities, said, When a CMA includes credit card and payment functions, short-term deposits worth 20 trillion won (15.9 billion dollars) are likely to move to securities funds.
○ Where to invest
Securities companies are attracting investors with high returns and more services, while banks are trying to retain customers through the promise of stability and favorable interest rates for loans.
The interest rate of CMAs is 2.5 percent per year, higher than banks MMDA accounts. Stock companies are highlighting their offer of interest when a customer deposits money only for one day.
Hana Daetoo Securities decided on an interest rate of up to 4.1 percent per year with a limit of three million won (2,390 U.S. dollars) to those opening its new CMA Surprise. CMAs are more convenient to buy funds or equity linked security than other investment products sold by securities companies. In other words, they become the hub accounts of investment.
Certain securities companies have exempted wire service and withdrawal fees and offered free investment information to investors who bought investment products such as funds through CMAs. The disadvantage, however, is that investors could suffer losses in the worst-case scenario except for a few CMAs guaranteeing up to 50 million won (40,000 dollars) in deposit.
The biggest advantage of banks is their relationship with loans. Goo Hyeon-soo, product development team manager at Shinhan Bank, said, Those who opened CMAs when they got their first job are likely to move to bank accounts after they get married and move into new houses. This is because banks are trying to cut loan interest rates to those who receive their salary in the banks accounts or increase the limit of the amount.
Song Seung-yong, consulting team manager at Hope Financial Group, said, Even if you have a bank account, you cannot get favorable loan terms if you lack a good credit rating or dont have a long relationship with a bank. Its much better to have an account at a place where you can get a 100 won (7.9 cents) more.