"From Yeongkkeul to Debt Investment"... Card Industry Launches 'Minus Card' Like Overdraft Credit Card

Lotte Card Launched 'Minus Card' on 25th Last Month
Woori Card and Shinhan Card Also Operating 'Minus Loan'

[Asia Economy Reporter Ki Ha-young] 'Minus cards,' similar to bank overdraft accounts, are emerging one after another. This is due to the increased number of people needing urgent funds for living expenses amid the ongoing impact of the novel coronavirus disease (COVID-19) this year, combined with new loan demands such as home purchases and stock investments. Minus cards have the advantage of allowing users to freely use funds within the loan limit at a fixed interest rate, but since they are loan products, indiscriminate use should be avoided.

According to the card industry on the 3rd, Lotte Card launched a minus card on the 25th of last month. It is targeted at Lotte Card members whose creditworthiness has been verified based on transaction performance, with a usage limit of up to 50 million KRW, similar to card loans. The interest rate starts from a minimum annual rate of 4.95%, determined according to the customer's credit rating. The usage period is one year and can be extended through screening. Applications for the minus card can be made via the Lotte Card application, website, or customer center.

Lotte Card is also holding a launch event for the minus card. Until the 31st of this month, 200 customers who newly sign up for the minus card each week will be selected by lottery to receive Starbucks coupons, and customers who use more than 1 million KRW after signing up will be entered into a draw to receive up to 1 million KRW back.

Earlier, Woori Card introduced the 'Wooka Minus Loan' in August. It is available to Woori Card credit card holders with excellent credit ratings, with a usage limit of up to 100 million KRW. The interest rate ranges from 4.0% to 10.0% annually, depending on the customer's credit rating. Considering that the average interest rate for existing long-term card loans (card loans) is 13-14% annually, Woori Card claims this is one of the industry's lowest rates. The contract period is one year and can be extended annually based on creditworthiness.

Shinhan Card has been continuously operating its product since introducing the 'Minus Loan' in 2008 for customers with excellent credit ratings. The usage limit ranges from 3 million to 50 million KRW, with interest rates between 8.7% and 21.9% annually. The basic contract period is 12 months, and depending on creditworthiness, automatic extensions of up to three years in one-year increments are possible.

Minus cards are useful when urgent funds for emergency money or living expenses are needed because they allow free use within the agreed period and limit at a fixed interest rate. Since interest costs are paid only on the amount and duration used, interest management is more reasonable compared to existing card loans. However, even though the interest rate is fixed, it is relatively higher than that of first-tier financial institutions. Also, since it is a loan product, even if the number of loan cases is counted as one, late payments can affect credit ratings, including credit score drops, so indiscriminate use should be avoided.

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