Card Loan Interest Rates Rising... "Will Emergency Funds Access for Ordinary People Be Blocked?"

Card Loans See Increase in High Credit Borrowers
Concerns Rise Over Access to Emergency Funds for Low-Income People
If DSR Card Loans Are Introduced Next Year

[Asia Economy Reporter Ki Ha-young] The average interest rate on card loans (long-term card loans) is rising, and the proportion of high-credit borrowers is also increasing. This is interpreted as high-credit borrowers with real demand who could not borrow money from banks due to the government's household loan total volume restriction flocking to card loans. As card loan interest rates rise and card loans are included in the debt service ratio (DSR) calculation on a borrower basis starting next year, concerns are emerging that the quick cash window for ordinary people may be blocked.

According to the disclosure by the Credit Finance Association on the 22nd, as of the end of October, the average interest rate (operating price) of card loans based on the standard grade of seven specialized card companies (Shinhan, Samsung, KB Kookmin, Hyundai, Lotte, Woori, Hana Card) recorded 12.09~14.73%. The average of the seven companies was 13.58%, up 0.41 percentage points from the previous month (13.17%).

Last month, among the seven card companies, the average card loan interest rate of four companies rose. Shinhan Card, which has the largest card loan balance, showed the largest increase, rising 1.67 percentage points from the previous month to 13.13%. Woori Card also rose 1.58 percentage points to 14.43%, following Shinhan Card. Samsung Card and KB Kookmin Card also recorded increases of 0.8 percentage points and 0.31 percentage points, respectively, to 13.73% and 13.81%.

As financial authorities closely monitor card loans for household loan management, card loan interest rates are on the rise. According to the Financial Supervisory Service, card loan usage in the first half of this year increased by 5.8% compared to the first half of last year. In particular, the usage amount of long-term card loans (card loans) surged 13.8% to 28.9 trillion won.

Accordingly, financial authorities urged the card industry to manage loans such as card loans to curb household debt. As a result, Lotte Card raised its card loan interest rate by 2.2 percentage points in August within a month, and Hyundai Card's card loan interest rate jumped 0.59 percentage points in September compared to the previous month.

Although card loan interest rates are rising, high-credit borrowers are flocking to card companies as bank credit loan interest rates rise. As of September, the proportion of Samsung Card members with card loans under 10% interest was 24.79%, an increase of 7.56 percentage points from the previous month. Shinhan Card also saw the proportion of card loan customers with interest rates under 10% rise by 5.23 percentage points to 23.36%. During the same period, Woori Card recorded 10.92%, up 4.37 percentage points. This intensifies the "balloon effect," where demand shifts from the first-tier financial sector to the second-tier financial sector due to tightened loan regulations in the first-tier sector.

Card loan interest rates are likely to continue rising. The Bank of Korea has announced another rate hike within the year, and the financial authorities' stance on curbing household loans remains unchanged. Starting January next year, card loan balances will be included in the DSR calculation. The DSR standard for borrowers in the second-tier financial sector has also been lowered from 60% to 50%. Because of this, concerns are raised that small business owners and ordinary people in urgent need of funds will have nowhere to borrow money.

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