[Ki Ha-young's Daily Card] Comparing Preferred Interest Rates by Card Company? ... Available from the 20th

New Card Loan Interest Rate Disclosure System to be Applied from the 20th
Starting with Card Loans, Scheduled to Apply to Credit Loans in September and Cash Services in November

[Asia Economy Reporter Ki Ha-young]Is there anyone these days without at least one credit card? In modern society, anyone can have a card if they want. Credit cards have brought unparalleled convenience to daily life. Now, wherever you go, you can easily see people paying with credit cards or smartphones. As demand has increased, cards with various benefits are being released almost daily. Accordingly, Asia Economy delivers diverse stories related to cards, which are inseparable from our consumer life, through the weekly 'Cards in Daily Life' corner, including introductions of new cards, industry behind-the-scenes, and guides for card beginners.

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Starting from the 20th, the different credit rating systems used by card companies will be standardized and disclosed based on 'default rates.' The default rate is the probability of being overdue for more than 90 days within one year from the loan handling date. Based on this default rate, the internal ratings of each card company will be converted into a 10-grade system called 'standard rating,' and loan interest rates will be disclosed accordingly.

The Korea Federation of Credit Finance Companies announced that it will implement a card loan product comparison disclosure system based on this from the 20th. With this revision, the rating segments will be adjusted from the current 'grades 1?3, grade 4, grade 5, grade 6, grades 7?10' to the same system as banks and mutual finance companies: 'grades 1?2, grades 3?4, grades 5?6, grades 7?8, grades 9?10.'

Above all, loan interest rates including preferential rates will be disclosed in detail. Currently, only the average loan interest rate applied to each grade has been disclosed, but from now on, it will be divided into base price, adjusted interest rate, and operating price. By separately disclosing the adjusted interest rate, which adjusts the base price with preferential rates and special discount rates, and the final interest rate reflecting the adjusted interest rate from the base interest rate, consumer confusion caused by discrepancies between loan interest rates is expected to decrease. Additionally, to prevent consumer confusion and provide diverse information, disclosures by credit rating agencies' (CB) credit grades will also be conducted in parallel.

Until now, card companies have disclosed loan interest rates based on credit rating standards provided by external credit rating agencies (CB). However, since the actual credit rating is determined by combining each company's internally operated standards, there have been criticisms that the disclosed standards differ from the actual applied standards, causing confusion. In particular, as card companies have used loan interest rates as a marketing tool, they have offered significantly lower rates to new loan customers while excluding existing customers from discounts, resulting in interest rate differences that are difficult to reasonably explain even among customers with the same credit rating. The Credit Finance Association expects that this revision of the loan interest rate disclosure system will resolve such consumer inconveniences. Furthermore, it is anticipated to strengthen consumer choice, encourage prudent loan decisions, and promote healthy interest rate competition among card companies.

However, there are points to note when using the new loan interest rate disclosure system. Since the disclosed data unifies the different internal rating systems of each card company into a 10-grade system based on default rates, there may be differences from the interest rates actually applied at the time of loan. Also, since the disclosed rates are averages of loan interest rates handled in the previous month (for card loans and credit loans) or the previous quarter (for cash services), they may differ from the rates currently applied at the time of disclosure.

The new loan interest rate disclosures can be checked on the Korea Federation of Credit Finance Companies website starting from the 20th for card loans. The new standards will also be applied to credit loan interest rate disclosures in September and cash service loan interest rate disclosures in November.

This content was produced with the assistance of AI translation services.