Interest Calculator

Deposit and Savings Interest in Depth: From Compounding to After-Tax Returns

Between the advertised annual rate you see at the bank and the money that actually lands in your account at maturity stand three gates: how interest accrues (simple vs compound), the 15.4% tax withheld from interest, and the monthly-installment structure peculiar to savings plans. Miss any of these and you'll sign up for a '4% savings plan' only to receive roughly half the interest you expected. This guide puts numbers on all of it — how fast compounding pulls ahead, how the tax is structured, how to convert a nominal rate into an after-tax effective yield, what installment-savings interest really is, and how deposit insurance limits work.

How Fast Simple and Compound Interest Diverge — the Rule of 72

Simple interest accrues only on the principal, so it grows in a straight line; compound interest earns interest on interest, so it grows along a curve. The gap is almost invisible at first and accelerates over time. The classic shortcut for judging that speed is the Rule of 72: years to double your principal ≈ 72 ÷ annual rate (%). At 4% compounded, 72 ÷ 4 = about 18 years; at 6%, about 12 years. With simple interest at the same 4%, doubling takes 100% ÷ 4% = 25 years.

The table is a simplified comparison of KRW 10 million growing at 4% a year. The simple-versus-compound difference is small over one year, while assumptions matter more as the period grows. This calculator's compound option assumes monthly compounding, so it is slightly higher than the annual-compounding figures above. Actual deposits and savings plans differ in accrual and payment frequency, renewal, bonus-rate, and early-withdrawal terms. A rollover scenario should separately allow for changing rates, tax, and gaps between maturities; investment products such as CMA accounts and short-term notes do not share every deposit's return, risk, or protection structure.

The Anatomy of the 15.4% Interest Tax

Ordinary deposit and savings interest is generally subject to 15.4% withholding, made up of 14% interest income tax plus 1.4% local income tax. For ordinary withholding income whose annual interest-and-dividend total stays within the statutory threshold, withholding may complete the taxation. If the combined total exceeds KRW 20 million, however, the full financial-income amount is generally included with other comprehensive income and the liability is calculated under Korea's comparison-tax rules, so filing requirements must be checked. Tax-exempt, separately taxed, and year-specific special categories can have different aggregation and rates; confirm the applicable NTS guidance or seek tax advice.

The calculator's 1.4% option is a comparison scenario only for certain existing mutual-finance member deposits where that rate actually applies. Statutory rates can differ by opening date under Article 89-3 of the Restriction of Special Taxation Act, so confirm the rate that applies to you in the product terms or with the provider. Use the 0% option only for income that is actually exempt. Tax-free comprehensive savings has statutory eligibility—including Basic Pension recipients age 65 or older and registered persons with disabilities—and a KRW 50 million principal cap per person. An ISA is tax-free only up to its statutory allowance; income above that allowance is taxed separately. On KRW 50 million at 4% for one year, pre-tax interest is KRW 2,000,000 and standard after-tax interest is KRW 1,692,000. If the full amount legally qualifies as tax-free, the interest remains KRW 2,000,000, a difference of KRW 308,000.

Converting a Nominal Rate into an After-Tax Effective Yield

Compare the advertised rate with the after-tax return. For a one-year simple-interest deposit whose full interest is taxed at the standard 15.4%, after-tax interest rate ≈ nominal rate × (1 − 0.154) = nominal rate × 0.846 is a useful approximation. A 4.0% rate becomes about 3.38%, and 3.5% becomes about 2.96%. Under that same simplified assumption, matching 2% inflation requires roughly 2 ÷ 0.846 ≈ 2.36% before tax. The exact real return is (1 + after-tax return) ÷ (1 + inflation) − 1, and compounding, tax timing, bonus-rate eligibility, and early-withdrawal terms can change it. Multiplying by 0.846 is therefore a comparison shortcut, not a guarantee of purchasing-power preservation or product ranking.

The Installment-Savings Trap — Why a 4% Plan Pays Half That

Almost everyone checking their first installment-savings payout wonders, 'Why is the interest so small?' The reason is not that the bank cheated — it's the monthly deposit structure. The annual rate applies only to the time each installment actually sits in the bank. In a 12-month plan, the first month's deposit earns 12 months of interest, but the final month's deposit earns just one. Since the average deposit period is about 6.5 months, the perceived return on total principal drops to about 54% (13/24) of the advertised rate.

• Setup — KRW 1,000,000 per month × 12 months, 4% simple-interest savings plan (total principal KRW 12,000,000)
• Pre-tax interest = 1,000,000 × (4% ÷ 12) × (12 + 11 + … + 1) = 1,000,000 × 78 × 0.3333% = KRW 260,000 (about 2.17% of total principal)
• Interest tax = 260,000 × 15.4% = KRW 40,040
• After-tax interest = KRW 219,960 — about 1.83% of total principal
• Comparison — Put the same KRW 12,000,000 into a 4% one-year time deposit and you get KRW 480,000 pre-tax, KRW 406,080 after tax — about 1.8 times the savings plan.

So if you already have a lump sum, a time deposit is the natural tool; if you're saving fresh money each month, an installment plan is. Even when a promotional savings rate looks higher, splitting an existing lump sum into monthly installments can be worse on an effective basis. For a fair check, calculate the deposit and installment scenarios separately under comparable funding assumptions and record the after-tax payouts. Once an installment plan matures, you can then consider moving the lump sum into a time deposit.

Deposit Insurance Limits and Spreading Your Money

No rate is high enough to matter if the institution fails. Under the Depositor Protection Act, even if a bank or savings bank goes bankrupt, up to KRW 100 million per person, per institution — principal and interest combined — is protected. This limit was raised from the previous KRW 50 million in September 2025 (Korea Deposit Insurance Corporation). Mutual-finance institutions such as Saemaul, Shinhyup, and Nonghyup community cooperatives are covered not by the KDIC but by their own central federations' funds (banks like NH Bank and Sh Suhyup Bank fall under the KDIC), with the same KRW 100 million limit.

• The limit counts principal plus interest combined. Factor in maturity interest and keep each institution comfortably below KRW 100 million.
• Multiple branches and accounts at the same bank are all added together. Diversification only counts across different financial institutions.
• The more you chase high promotional rates at savings banks, the more spreading within the limit matters. Protecting your principal outranks a 0.2–0.3%p rate difference.
• Only deposits, savings plans, and other products explicitly identified as deposit-protected financial products are covered. A product is not protected merely because it is described as principal-guaranteed; investment products such as funds, stocks, bonds, and RP-type CMA accounts are not covered.

The rates and limits in this guide reflect the rules as of the time of writing and may change with tax-law and regulatory revisions. Before signing up, confirm the latest terms with your financial institution and official bodies such as the Korea Deposit Insurance Corporation and the National Tax Service.

Related Tools and Guides

• Loan Repayment Calculator — see how the same compounding structure works against you when you're the one paying interest
• Stock Return Calculator — compare after-tax deposit yields and investment returns on equal footing
• Net Salary Calculator — the starting point for figuring out how much you can save each month