Credit Card Companies, Speed Adjustment?... Card Loan Interest Rates Slightly Increase (Comprehensive)

5 Card Companies Raise Rates by 0.05~0.13%P
Increased Delinquency Burden Leads to Speed Adjustment

Photo by Getty Images Bank

[Asia Economy Reporter Ki Ha-young] Card companies are raising relatively high card loan (long-term card loan) interest rates despite the prolonged low interest rate environment. This is interpreted as a move to slow down lending as more people are taking out credit loans from card companies amid the real estate and stock investment boom, and the burden of delinquencies has increased due to the resurgence of COVID-19. It is expected that the burden on households and low-income earners, who already find it difficult to get loans due to the high thresholds of commercial banks, will increase.

According to the disclosure by the Credit Finance Association on the 3rd, the average card loan interest rates (standard price) for seven specialized card companies (Shinhan, Samsung, KB Kookmin, Hyundai, Lotte, Woori, Hana) as of the end of July ranged from 14.57% to 16.73%, slightly rising compared to the previous month. Samsung Card's card loan interest rate rose by 0.07 percentage points to 16.73%. Following that, Lotte Card recorded 16.07%, up 0.05 percentage points from the previous month. Shinhan Card increased by 0.12 percentage points to 15.92%, and Hyundai Card rose by 0.13 percentage points to 15.9%. KB Kookmin Card also increased by 0.12 percentage points to 15.33%. On the other hand, Woori and Hana Cards saw slight decreases. The average card loan interest rates for Woori Card and Hana Card during this period were 14.57% and 15.03%, down 0.16 and 0.11 percentage points respectively from the previous month.

The increase in average card loan interest rates by card companies is interpreted as an effort to control the pace of lending. As COVID-19 prolongs and card loans are mainly used by middle- and low-credit borrowers, a rise in delinquency rates among vulnerable borrowers could pose a risk to asset soundness. Since card loans are primarily used by middle- and low-credit borrowers who find it difficult to get loans from commercial banks, there is an analysis that repayment of loan principal may be challenging.

In fact, the use of card loan services surged sharply in June. The card loan usage amount of the seven specialized card companies in June was 3.9415 trillion KRW, a 16.3% increase compared to the previous year. It also rose 11.8% compared to the previous month. This is similar to the increase in card loan lending in March when the impact of COVID-19 began to intensify. At that time, the card loan scale was 4.3232 trillion KRW, an increase of 459.7 billion KRW (11.8%) from the previous month.

However, the average card loan interest rate (operating price), which applies preferential rates and special promotional discounts to the standard price, generally declined compared to the previous month. As of July, the rates were ▲Shinhan Card 13.70% ▲Samsung Card 14.22% ▲KB Kookmin Card 13.72% ▲Hyundai Card 13.67% ▲Lotte Card 13.87% ▲Woori Card 13.02% ▲Hana Card 13.25%. Woori Card's rate dropped significantly by 1.65 percentage points from the previous month. During the same period, Shinhan Card decreased by 0.19 percentage points, Hyundai Card by 0.42 percentage points, and Lotte Card and Hana Card also fell by 1.07 and 0.25 percentage points respectively.

An industry insider said, "Demand for card loans has been increasing recently," adding, "In the prolonged COVID-19 situation, we are closely monitoring the rise in delinquency rates as it could affect asset soundness."

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