The US Federal Reserve's dovish signal of the end of the current rate hike cycle, a slackening of momentum for Thailand's economic growth amid risks from the global economic slowdown and domestic political instability, and the liquidity surplus in the local financial system suggest that low interest rates will persist for an extended period.
Even though many basic savings accounts offer as little as 0.70% annual interest, there are still plenty of high-yield savings accounts, particularly those exclusive to online banking, that provide interest rates of 1.5% or higher, similar to time-deposit accounts.
Emergency fund options
No one can predict the future, so it makes sense to set aside some money for an emergency fund to have a buffer in case the unexpected happens.
High-yield savings accounts are the best place for individuals to keep an emergency fund and gain a little interest in the process.
At least 20-30% of a person's assets should be allocated to a class that can be converted into cash rapidly for unexpected expenses, with high-yield savings accounts the top recommendation, said Picha Ratanatam, executive vice-president and chief of wealth management at Tisco Bank.
Many high-yield savings accounts offer interest of 1.50%, compared with 1.60% offered by some fixed deposits accounts. The former has better flexibility for an emergency fund because there is no lock-up period, Mr Picha said.
High-yield savings accounts are more attractive than money market funds, a popular instrument for parking cash for short durations in previous years, given that the latter yields a mere 1% return now.
Moreover, high-yield savings accounts have an advantage over money market funds, which contain credit risks and are subject to a withholding tax from investment in short-term bonds, Mr Picha said.
Savings accounts are tax-exempt if interest earned is less than 20,000 baht per year, while the Deposit Protection Agency provides full coverage of up to 10 million baht per depositor per financial institution, before halving the maximum limit to 5 million this August. The maximum drops again to 1 million baht from August 2020.
"People should shun money market funds and shift to high-yield savings accounts because of better returns and deposit protection," Mr Picha said.
However, depositors should carefully study the conditions of special savings accounts, as most come with restrictions and requirements such as cash withdrawal limits and minimum deposit balances, he said.
They should also cautiously calculate the average interest rate offered by step-up savings accounts, Mr Picha said.
Best savings accounts
According to data compiled by the Bangkok Post, the TMB Dream Savings account offers the best annual interest at 2.50% for the first six months and 2% thereafter.
Although there is no limit for withdrawal frequency per month, it requires depositors to make deposits in a range of 500-25,000 baht per month.
Unlike many high-yield savings accounts that prohibit individuals from opening more than one account, TMB Dream Savings allows depositors to open subsequent accounts at the same time.
CIMB Thai Bank's Digital Savings account offers depositors 2% interest for those who park up to 100,000 baht in the account, but the rate is reduced to 0.40% for the part of the balance that exceeds 100,000 baht.
Digital Savings also has no limits on cash withdrawals. Since it's a digital banking product, individuals must open the account via the bank's mobile app, myCIMB.
Depositors are prevented from opening more than one account.
State-owned GH Bank has a generous smattering of choices, with nine savings accounts offering at least 1.50% interest.
The Happy Home account yields 1.75% for deposit balances of up to 1 million baht, while the rate drops to 0.75% for the portion of the balance over 1 million baht. This product is only offered to the bank's mortgage borrowers.
For depositors who are not GH Bank mortgage customers, the Life Begins savings account offers 1.75% interest. The account restricts cash withdrawals to one per month, with a fee of 0.50% of the withdrawal amount, with a minimum of 500 baht per transaction, for the second and all subsequent withdrawals per month.
Life Begins depositors receive no return if the balance is lower than 10,000 baht.
Retirees or anyone at least aged 60 searching for attractive savings account returns may want to try GH Bank's Chao Sao Savings. It offers an interest rate of 1.60% for a balance below 5 million baht, 1.80% for 5 million to 20 million baht, and 1.50% for balances of more than 20 million baht.
For depositors younger than 20 years old, they are eligible for GH Bank's New Gen savings account with a 1.55% interest rate. That interest rate is for a balance of 100,000 to 1 million baht. If the balance drops below 100,000 baht or rises above 1 million, the interest rate dips to 1%.
Depositors with a monthly income of below 25,000 baht can try GH Bank's Pracharat savings account, offering a 1.65% interest rate if the balance is lower than 300,000 baht. The interest rate drops to 0.90% for the portion of the balance above 300,000 baht. Depositors are required to participate in a financial literacy course in return for the attractive interest rate.