South Koreans are opting to carry over their credit card dues and increasing borrowing from multiple lenders as their living affordability worsens from rapid rises in interest rates and inflation.
The balance in revolving credit, the option of carrying over credit card payments to the next month with an interest charge, taken by credit card holders in their 40s and 50s, reached 3.8 trillion won ($2.9 billion) on June 30, 2022, according to the Financial Supervisory Service data disclosed by Rep. Jeon Jae-soo of the Democratic Party on Sunday.
Credit card revolving used by Koreans in their 40s jumped from 1.9 trillion won in 2018 to 2.5 trillion won by end of June this year, exceeding the 2 trillion won mark for the first time among all age groups. The revolving arrangement can ease the monthly payment burden, but the balance carried over to the next month is counted as debt and subject to the maximum legal interest rate of 20 percent.
Multiple borrowing by Korean households is also on a steep rise, as consumers take out loans from three or more lenders to cover higher living costs amid soaring inflation.
Loans taken out by people in their 40s and 50s from lenders other than banks came to 422.2 trillion won as of March 31, 2022, leaping from 387.8 trillion won at the end of 2018 and 421.8 trillion won at the end of 2021.
Also, the number of multi-borrowers aged from 40 to 59 climbed to 2,561,909 by the end of March this year from 2,488,459 in 2020. They represent 26.7 percent of a total of 9,605,397 multi-borrowers in Korea as of March, up from 26 percent in 2020.
Multiple borrowing by younger Koreans, those in their 20s and 30s, has been growing even faster.
Data from the Financial Supervisory Service shows that the number of multi-borrowers hit 4.51 million on April 30, 2022, with debt dues totaling 598.8 trillion won. The figures had jumped 8.3 percent and 22.0 percent, respectively, from the end of 2017.
Multiple borrowings by Koreans 30 years old or younger amounted to 158.1 trillion won as of the end of March. The figure is up 32.9 percent from the end of 2017, marking the fastest growth among all working-age groups.
Debt amount per borrower rose 12.8 percent over the same period, with the youth group also recording the sharpest growth of 29.4 percent.
Personal loan from non-banks, which usually charge higher interest rates than banks, is growing rapidly. Multiple borrowing from mutual savings banks jumped 78 percent and from credit-specializing firms by 44.4 percent, while that from regular banks grew 30.5 percent over the same period, from the end of 2017 to the end of April 2020.
The deterioration in personal economic power, especially of those in their 40s and 50s, the main working age group, affects household income and consumption, said Yang Joon-seok, an economics professor at The Catholic University of Korea.
By Park Na-eun, Seo Jung-won and Cho Jeehyun
[ⓒ Pulse by Maeil Business Newspaper & mk.co.kr, All rights reserved]