[The High-Interest Trap] Cash Services and Revolving Credit Tempting Ordinary People... Woori and Lotte Show High Growth Rates

(Part 1) Card Companies' New Cash Service Transactions Near 13 Trillion Won in Q2 This Year
Revolving Payment Carryover Balance Also 6.5 Trillion Won
Emergency Funds for Ordinary People, Interest Burden Growing Like a Snowball

[Asia Economy reporters Buaeri and Yujehun] #Office worker A, who works at a small company, fell into distress as the cash services he started using due to a low salary became unmanageable. As he covered his tight living expenses with cash services, the accumulated cash service balance exceeded 8 million won, and the card payments he had to repay through revolving credit at two card companies reached 12 million won. A said, "It was useful because I could get money quickly in an emergency, but at some point, the interest snowballed."

It has been found that the performance of cash services and revolving credit by card companies, which tempt low-income people, is increasing every year. In particular, the revolving credit, which involves paying only part of the card bill and carrying the rest over to the next month, showed increased performance across all seven specialized card companies. The commission rates for cash services and revolving credit reach up to 19.95%, leading to criticism of it being an 'interest bomb relay.'

According to data on 'cash service handling performance of seven specialized card companies (Shinhan, Samsung, Kookmin, Hyundai, Lotte, Woori, Hana Card)' received by Asia Economy on the 12th through Park Jae-ho, a member of the National Assembly's Political Affairs Committee from the Democratic Party, the amount of new cash services handled in the second quarter of this year was 12.9437 trillion won. This is an increase of about 340.5 billion won (3%) compared to the same period last year. Cash services have shown an increasing trend every year; the amount of new cash services handled in the second quarter of 2020 was 11.7788 trillion won, which grew to 12.6032 trillion won in the second quarter of 2021, nearly a trillion won increase.

Looking at each card company, Woori Card showed the highest growth rate. In the second quarter of this year, Woori Card's new cash service handling amount was 1.4945 trillion won, about a 28% increase compared to 1.1694 trillion won in the same period last year. Next was Kookmin Card with 2.2981 trillion won, about a 4% increase from 2.2164 trillion won in the same period last year, ranking second in growth rate. Following were Lotte Card (2%) and Shinhan Card (1%). The remaining Samsung, Hyundai, and Hana Cards saw a decrease in new cash service handling amounts compared to the same period last year.

The revolving credit balance carried over for payment among the seven card companies was 6.5469 trillion won as of the second quarter of this year. This is nearly an 18% increase compared to 5.5673 trillion won in the same period last year. The revolving credit balance for payments has also shown an increasing trend every year, rising from 5.2272 trillion won in the second quarter of 2020 to 5.5673 trillion won in 2021, an increase of 340.1 billion won.

All seven card companies showed increased performance in revolving credit. Among them, Lotte Card had the highest growth rate. Lotte Card's revolving credit balance carried over for payment in the second quarter of this year was 853.8 billion won, a 32% increase compared to 644.4 billion won in the same period last year. Next was Woori Card, with a revolving credit balance of 405.8 billion won in the second quarter of this year, about a 26% increase from 322.8 billion won in the same period last year. Hyundai Card's revolving credit balance carried over increased from 922.4 billion won in the second quarter of last year to 1.1653 trillion won this year, surpassing 1 trillion won and growing nearly 26%. Following were Shinhan (15%), Samsung (13%), Kookmin (11%), and Hana (5%).

High-interest cash services and 'revolving credit,' which delays payment of card bills, serve as emergency financial channels for low-income people, but as their scale grows, the interest burden increases, raising the risk of delinquency and highlighting the need for proper management. Representative Park said, "The increase in high-interest revolving credit amid economic recession and high inflation, which increase the burden on low-income people, indicates the limit situation of vulnerable borrowers," and added, "Financial authorities should closely monitor vulnerable borrowers and be vigilant about the spread of credit risk."

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