Card companies’ delinquency rate rise on higher loans, revolving credit

2023.05.22 14:20:01 | 2023.05.22 14:39:37

[Photo by Kim Ho-young]이미지 확대

[Photo by Kim Ho-young]

South Korea’s credit card companies are seeing a rise in their delinquency rate as more consumers are opting to carry over their credit card dues and increasing borrowing due to an economic slowdown, raising concerns about the health of these financial companies.

The balance of credit card loans by stood at 34.12 trillion won ($25.89 billion) at the end of March this year, an increase of more than 1 trillion won from 33.65 trillion won at the end of last year, according to the Financial Supervisory Service data disclosed by Representative Yang Kyung-sook of the Democratic Party on Monday.

By age, the balance of card loans taken out by people in their 50s was a record 11 trillion won, exceeding 10.92 trillion won by those in their 40s. The balance of card loans has rapidly increased from 29 trillion won at the end of 2019 to 32 trillion won at the end of 2020 to 33 trillion won in 2021 and 2022 and 34 trillion won in the first quarter of this year, mainly driven by borrowers in their 50s and 60s.

“The problem is that the delinquency rate is increasing across all financial sectors, from banks to credit card companies to savings banks,” an official from a credit card company said. “As many of those who take out card loans are borrowers from multiple lenders, the entire industry should have to manage potential risks with great vigilance for the time being.”

Credit card revolving used by Koreans is also on a rise. According to the Credit Finance Association, the balance in revolving credit at seven local card companies, including Shinhan Card Co., Samsung Card Co. and KB Kookmin Card Co., stood at 7.17 trillion won in April this year, a nearly 1 trillion won increase from 6.27 trillion won a year ago.

Revolving credit is a service that allows a credit card holder to pay only part of the credit card bill after purchasing a product with a card in a lump sum payment and pay the rest later. It has the advantage of being able to extend repayment of some of the bill without overdue payments, but the interest is actually close to the legal maximum rate of 20 percent per annum, which is a burden to users.

Data from the Financial Supervisory Service shows that the delinquency rate at card companies, which refers to cardholders falling behind on required monthly payments, including card payments, installment payments, revolving, card loans and credit loans, for more than one month, exceeded 1 percent at most of those companies.

By company, Shinhan Card’s delinquency rate stood at 1.37 percent, Samsung Card at 1.10 percent, KB Kookmin Card at 1.19 percent, Lotte Card Co. at 1.49 percent, Woori Card Co. at 1.35 percent and HanaCard Co. at 1.14 percent.

In the case of Shinhan Card, the delinquency rate is the highest since the third quarter of 2019 when it stood at 1.40 percent. KB Kookmin Card’s rate is the highest since the first quarter of 2020 when it stood at 1.24 percent and Samsung Card’s rate is the highest since the second quarter of 2020 when it stood at 1.2 percent.

By Pulse

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