July Card Loans, Slight Interest Rate Increase for High Credit Borrowers

Average Interest Rates of 7 Card Companies 12.66~13.96%
Slight Increase in Rates for High Credit Borrowers
Possibility of Rate Hikes in the Second Half of the Year

[Asia Economy Reporter Ki Ha-young] Last month, the interest rates on long-term card loans (card loans) slightly increased compared to the previous month. Despite the reduction in the maximum interest rate, this is interpreted as the result of relatively higher card loan interest rates for high-credit borrowers due to the financial authorities' stance on curbing household loans. With interest rate hikes expected within the year and the financial authorities' continued policy to restrain household loans, card loan interest rates are anticipated to rise further.

According to the disclosure by the Credit Finance Association on the 23rd, as of the end of July, the average card loan interest rates (operating price) based on standard grades of seven major credit card companies?Shinhan, Samsung, KB Kookmin, Hyundai, Lotte, Woori, and Hana?ranged from 12.66% to 13.96%. The average of the seven companies was 13.1%, a slight increase of 0.15 percentage points from 12.95% in the previous month.

Among the seven card companies, five saw their average card loan interest rates decrease, but the rise in Samsung Card and Woori Card outweighed this. Samsung Card recorded an average interest rate of 13.96% last month, up 1.29 percentage points from 12.67% in the previous month. Samsung Card, which had applied the maximum interest rate reduction since June, saw its average card loan interest rate drop by more than 1 percentage point in June but rose by the same amount again last month. Woori Card also raised its average interest rate to 13.24%, up 0.79 percentage points from 12.45% in the previous month, pushing up the average of the major card companies.

In particular, the average interest rate remained similar to the previous month as the card loan interest rates for relatively high-credit borrowers increased. Previously, when there were large public offering subscriptions, demand for card loans from high-credit borrowers surged, leading to a tendency for card loan interest rates to fall, but this time was different. Despite public offering subscriptions from companies like KakaoBank last month, the average card loan interest rates for grades 1 and 2 increased in five of the seven card companies. The average interest rates for grades 1 and 2 across the seven companies ranged from 8.68% to 11.32%, showing an increase of 0.07 to 0.75 percentage points.

This outcome differs from the expectation that card loan interest rates would decrease following the reduction of the maximum interest rate from 24% to 20% starting July 7. As the rapid increase in household loans raised the risk of defaults, financial authorities recommended household loan management not only to primary financial institutions but also to secondary financial institutions, resulting in a slight increase in card loan interest rates.

In the second half of the year, card loan interest rates are also likely to rise. This is because the Bank of Korea has signaled interest rate hikes within the year, and the financial authorities' policy to curb household loans is being strengthened. An industry insider said, "When interest rates rise, funding costs also increase, so card companies have no choice but to consider raising card loan interest rates," adding, "From the perspective of managing household loans, it is highly likely that card loan interest rates will be raised or credit limits reduced as a form of adjustment."

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