Polarization in Card Loan Interest Rates: "High Credit Borrowers See a 3.41%p Drop in 6 Months"

Standard Loan Interest Rate Disclosure for 6 Months
Loan Rates for High Credit Borrowers in Grades 1-2 Decrease
Double-Digit Rates Persist for Low Credit Borrowers

[Asia Economy Reporter Ki Ha-young] Six months after the card loan interest rates were disclosed based on the standard credit rating, the gap between high and low interest rates has further intensified. While the loan interest rates offered to high-credit borrowers in grades 1 to 2 have decreased, the rates for low-credit borrowers remain stagnant at double-digit levels. This suggests that card loans, mainly used by middle- and low-credit borrowers, are becoming increasingly favorable only to high-credit borrowers, making it more difficult for low-credit users to access them.

According to the Credit Finance Association’s disclosure on the 21st, as of the end of November, Woori Card offered the lowest average interest rate of 6.25% for grades 1 to 2. In October as well, Woori Card provided the cheapest rate of 6.45% for the same grades, which is 0.2 percentage points higher than the current rate. Following Woori Card, IBK Industrial Bank Card (7.62%) and Samsung Card (8.42%) offered relatively favorable card loan interest rates to high-credit borrowers.

Since July, the Credit Finance Association has standardized internal credit ratings of card companies into a 10-grade system based on default rates to prevent interest rate reversals caused by marketing. They disclose ▲base price (non-discounted interest rate) ▲adjusted interest rate (discounted interest rate) ▲operating interest rate (final interest rate). The default rate refers to the probability of being overdue by more than 90 days within one year from the loan origination date.

For low-credit borrowers in grades 9 to 10, DGB Daegu Bank Card has offered the lowest interest rate of 18.90% for five consecutive months since July. Last month, five card companies provided card loans to grades 9 to 10: DGB Daegu Bank Card, Samsung, KB Kookmin, Hyundai, and Citibank Cards. The rates were Citibank Card 19.88%, Hyundai Card 22.01%, KB Kookmin Card 22.05%, and Samsung Card 22.70%, respectively.

The card loan interest rates applied to grades 1 to 2 have been decreasing for six months since the standard rating disclosure began in June. The rates sequentially dropped as follows: ▲June 9.66% (Samsung) ▲July 7.87% (IBK Industrial Bank) ▲August 7.46% (Woori) ▲September 6.54% (Woori) ▲October 6.45% (Woori) ▲November 6.25% (Woori). This is a decrease of about 3.41 percentage points over six months. Meanwhile, the lowest interest rate offered to low-credit borrowers in grades 9 to 10 since July remains at 18.90% by DGB Daegu Bank Card.

While interest rates for high-credit borrowers are falling, low-credit borrowers face limited borrowing options and persistently high rates. Notably, due to tightening loans in the first-tier financial sector, the number of high-credit customers using card loans primarily utilized by middle- and low-credit borrowers in grades 4 to 6 has significantly increased. As of October, 32.66% of Woori Card loan users received interest rates below 10%. Additionally, a minus card product for high-credit borrowers has been introduced. Woori Card operates the Wooka Minus Loan, offering card loans with interest rates ranging from 4% to 10% for high-credit customers.

Meanwhile, as of the end of November, the average card loan interest rates (operating prices) based on the standard rating for seven major full-service card companies (Shinhan, Samsung, KB Kookmin, Hyundai, Lotte, Woori, and Hana Card) ranged from 11.25% to 14.63%. The average rate among the seven companies was 13.26%, up 0.02 percentage points from 13.24% the previous month. Among the seven card companies, Shinhan, Woori, and Hana Card lowered their rates compared to the previous month, while Samsung, KB Kookmin, Hyundai, and Lotte Card raised theirs.

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