Card Loan Interest Rates Show 'The Rich Get Richer, The Poor Get Poorer' (Comprehensive)

Grades 1-2 See Interest Rates Drop for 4 Consecutive Months
Grades 9-10 Remain Unchanged

Photo by Yonhap News

[Asia Economy Reporter Ki Ha-young] Four months after card loan interest rates were disclosed based on a standard rating system using default rates, it has been found that the loan interest rates offered to high-credit borrowers in grades 1 and 2 are decreasing.

According to the disclosure by the Korea Federation of Credit Finance Companies on the 21st, as of the end of September, Woori Card offered the lowest average interest rate of 6.54% for grades 1 and 2. In August as well, Woori Card provided the most favorable rate of 7.46% for the same grades, which is 0.92 percentage points higher than the current rate. Woori Card originally has many high-credit customers, and the launch of the 'Wooka Minus Loan' in August, which offers card loans to high-credit customers within an annual interest rate range of 4.0% to 10%, is also considered to have influenced this trend. Following Woori Card, IBK Industrial Bank Card (7.69%) and Citibank Card (8.67%) offered relatively low card loan interest rates to high-credit borrowers.

For low-credit borrowers in grades 9 and 10, DGB Daegu Bank Card was the most favorable at 18.90%, continuing from August. Last month, four card companies, including DGB Daegu Bank, Samsung, KB Kookmin, and Hyundai Card, provided card loans to grades 9 and 10. Hyundai Card followed DGB Daegu Bank with a favorable interest rate of 20.53% for low-credit borrowers.

Interest Rates for Grades 1-2 Decline for Four Consecutive Months... Grades 9-10 Remain Stable

The card loan interest rates applied to grades 1 and 2 have been decreasing for four consecutive months since the standard rating system was first disclosed in June. Since July, the Korea Federation of Credit Finance Companies has standardized internal credit ratings of card companies into a 10-grade system based on the 'default rate,' which is the probability of being overdue for more than 90 days within one year from the loan issuance date, and has been disclosing ▲base rates (non-discounted rates) ▲adjusted rates (discounted rates) ▲operating rates (final rates). This is to prevent interest rate inversion caused by marketing and to facilitate comparison of loan interest rates.

The card loan interest rates for high-credit borrowers in grades 1 and 2 sequentially decreased from 9.66% by Samsung Card in June, 7.87% by IBK Industrial Bank Card in July, 7.46% by Woori Card in August, to 6.54% by Woori Card in September. On the other hand, the interest rate offered to low-credit borrowers in grades 9 and 10 has remained the lowest at 18.90% by DGB Daegu Bank Card since July. While interest rates for high-credit borrowers are decreasing, low-credit borrowers have fewer borrowing options and no change in interest rates, which is deepening the gap between the rich and the poor.

An industry insider said, "The main users of card loans are middle-credit borrowers in grades 4 to 6," adding, "Although the proportion of high-credit borrowers in grades 1 and 2 and low-credit borrowers in grades 9 and 10 is low, card companies have no choice but to operate different interest rates according to credit grades for risk management."

Seven Major Card Companies Slightly Lower Card Loan Interest Rates in September Compared to Previous Month

Meanwhile, as of the end of September, the average card loan interest rates (operating rates) based on the standard rating system for seven major card companies (Shinhan, Samsung, KB Kookmin, Hyundai, Lotte, Woori, and Hana Card) ranged from 12.74% to 14.15%, showing a decrease of 0.02 to 0.27 percentage points compared to the previous month. Among the seven companies, six lowered their rates except Hyundai Card, and the average rate for all seven companies was 13.61%, down 0.07 percentage points from 13.68% in the previous month.

Woori Card had the lowest rate at 12.74%, down 0.02 percentage points from the previous month. Following that, KB Kookmin Card lowered its rate by 0.2 percentage points to 13.37%, while Hyundai Card increased by 0.2 percentage points to 13.45%. Hana Card decreased by 0.06 percentage points to 13.52%, and Shinhan Card lowered by 0.09 percentage points to 13.99%. Lotte Card and Samsung Card also lowered their rates by 0.09 and 0.27 percentage points, recording 14.03% and 14.15%, respectively.

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