"Driven to High-Interest Loans"... Card Loan Balances for Those in Their 70s Double in Three Years

Card Loan Balances Among Those in Their 60s Surge by 49%

Share of Seniors Rises from 21% to 29%

Rising Reliance on High-Interest Loans Due to Income Gaps and Medical Expenses After Retirement

Concerns Grow Over Card Issuer Risk as Del

As the expansion of mid-interest rate loans for mid- to low-credit borrowers in the financial sector emerges as a key issue, it has been revealed that the outstanding balance of card loans among those aged 70 and older has more than doubled over the past three years. Analysts point out that the reliance on high-interest loans such as card loans is deepening among the elderly, as they fill liquidity gaps for living expenses and medical costs after retirement. There are also concerns that if the elderly's dependence on card loans increases, the quality of their debt could deteriorate, and a rise in delinquencies could place additional burden on the soundness of credit card issuers.

Yonhap News Agency

According to the Credit Finance Association of Korea on May 19, the outstanding balance of card loans at eight credit card companies (Shinhan, KB Kookmin, Hana, Woori, Samsung, Lotte, NongHyup, and Hyundai Card) increased by approximately 16%, from 36.8042 trillion won at the end of the first quarter of 2023 to 42.8069 trillion won at the end of the first quarter of this year. The outstanding balance of card loans, which are high-interest loans, surpassed 42 trillion won for the first time at the end of the fourth quarter of 2024 and has remained above the 42 trillion won level since then. As financial authorities have tightened household lending regulations, making it harder to borrow from commercial banks, demand for card loans has increased, reaching a new all-time high in the first quarter of this year.

What stands out is the sharp increase in the card loan balance among those aged 70 and older. The outstanding balance for this age group surged by about 109%, from 1.2789 trillion won at the end of the first quarter of 2023 to 2.6714 trillion won at the end of the first quarter of this year. This means the amount has more than doubled in just three years.

The increase among those in their 60s is also steep. The card loan balance for people in their 60s rose by about 49%, from 6.483 trillion won to 9.6424 trillion won during the same period. This was the highest growth rate among all age groups. Since 2024, the card loan balance for people in their 60s has increased almost every quarter, indicating a deepening dependence on card loans. As a result, the share of the elderly in the card loan market is expanding rapidly. In fact, the proportion of those aged 60 and older in the total outstanding card loan balance rose from about 21% in the first quarter of 2023 to about 29% in the first quarter of this year.

Cha Sangmi, Professor of Business Administration at Ewha Womans University, said, "As actual cash inflows decrease after retirement, there is a growing possibility that borrowers may move into the high-risk category," adding, "We cannot ignore the existence of the so-called 'income crevasse' group among the elderly who are experiencing income gaps."

The increase in card loan balances among those aged 60 and above is analyzed to be due to a combination of increased living expenses and rising medical costs resulting from deteriorating cash flow after retirement. In particular, as fixed incomes decrease and collateral capacity weakens after retirement, making it more difficult to borrow from banks, more elderly people are turning to card loans, which are relatively easy to obtain. Card loans can be accessed instantly through credit card company applications without the need for additional documents or complicated screening procedures.

An official from a domestic card company explained, "Card loans are set up with limits and interest rates in advance since customer credit scores and consumption pattern data are already accumulated during the card issuance process, so there is no need for additional income verification. Compared to bank credit loans, which require complicated paperwork, card loans are more accessible to the elderly."

In contrast, card loan balances among younger generations—previously seen as the main actors of 'Yeongkkeul' (maxing out all possible sources of money) and 'Bittu' (borrowing to invest)—have stagnated or declined. For people in their 30s, the card loan balance fell from 4.4824 trillion won to 4.0844 trillion won, and for those in their 40s, it decreased from 11.3955 trillion won to 10.4674 trillion won. The under-30 age group maintained a similar level, with little change. Notably, the card loan balance for those in their 30s declined from the mid-4 trillion won range to the low-4 trillion won range since the second half of last year, and for those in their 40s, it dropped below the 11 trillion won mark to the 10 trillion won range for the first time. The financial sector attributes this to the impact of the 'June 27 Household Debt Measures' implemented last year. Following the tightening of lending regulations, it has become more difficult for younger people to obtain additional unsecured loans, leading to a slowdown in the growth of card loan balances.

Since card loans are a representative high-interest loan product, concerns are being raised that the heavy interest burden and high risk of delinquency may increase the likelihood of defaults among elderly borrowers with insufficient repayment capacity. Especially if it becomes difficult to recover loans from elderly borrowers, it could worsen the soundness of card issuers, and if the scale of defaults grows, this risk could spread across the financial sector as a whole.

Seo Jiyong, President of the Korea Society of Credit Card Studies and Professor of Business Administration at Sangmyung University, stated, "The elderly have a relatively weak income base and may be vulnerable to economic shocks or increased interest burdens, which could lead to higher delinquency rates. This, in turn, could become a burden on the financial soundness of credit card companies."

Professor Cha also pointed out, "If elderly people with limited or no income engage in card loans, it could eventually result in non-performing loans. Since card loans are unsecured, the cost burden of recovering such loans can also be significant if they become non-performing."

Within the industry, there is also discussion about converting some card loan customers to mid-interest rate loans. The idea is to ease the burden on financially vulnerable groups by guiding them toward mid-interest rate loans, which have lower interest rates than card loans. However, since card loans are a main source of revenue for card issuers, there are views that actively pursuing such conversions faces practical limitations.

An official in the credit card industry commented, "Expanding mid-interest rate loans aligns with the policy direction of financial authorities. However, if loans to low-credit borrowers are increased unconditionally, the risk of defaults may rise, so it is necessary to comprehensively consider creditworthiness and repayment ability."

Professor Cha agreed on the need to guide low- and mid-credit elderly people toward mid-interest rate loans, but emphasized the need for a cautious approach. He said, "If the mid-interest rate loan market is expanded indiscriminately without verifying repayment ability, the non-performing loan problem could worsen in the future. If, in the long term, a large number of borrowers who cannot repay are brought in, the resulting burden could be passed on to the entire financial sector or to policy support funds."

Professor Seo also commented, "While the idea of guiding low- and mid-credit elderly borrowers toward mid-interest rate loans is desirable, enhancing effectiveness will require measures such as building alternative credit evaluation systems, linking with policy guarantees, and establishing flexible repayment structures."

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