As the economic downturn weakens the financial situation of ordinary people, the credit card companies' arrears rate rose in the first quarter of this year, reaching its highest level in about 10 years.
According to the financial sector on the 27th, the arrears rates for all credit card companies (for payments, installment payments, revolving credit, card loans, and personal loans more than one month overdue) increased as of the end of March. Hana Card’s arrears rate rose to 2.15% at the end of the first quarter, up 0.21 percentage points from the same period last year (1.94%) and 0.28 percentage points from the previous quarter (1.87%). This is the highest rate since Hana Card was launched in December 2014.
KB Kookmin Card's arrears rate stood at 1.61%, an increase of 0.31 percentage points from the same period last year and the previous quarter (both 1.31%), marking the highest rate since the end of 2014 (1.62%). Shinhan Card also reported an arrears rate of 1.61% at the end of the first quarter, which is up 0.05 percentage points from the same period last year (1.56%) and 0.10 percentage points from the previous quarter (1.51%), the highest since the end of the third quarter of 2015 (1.68%). Woori Card’s rate went up to 1.87%, an increase of 0.40 percentage points from last year's first quarter (1.47%) and 0.43 percentage points from the end of last year (1.44%).
As ordinary people's financial situations worsen, they are struggling to pay not only their credit card bills but also high-interest credit card loans. Last month, the average interest rate for card loans from nine credit card companies reached 14.83% annually, the highest level in two years and three months since December 2022.
As the threshold for bank loans rises, the balances of card loans, which serve as a quick cash source for ordinary people, and insurance contract loans continue to increase daily. The balance of card loans has continuously risen since last year, recording an all-time high of 42.9889 trillion won in February this year, but slightly decreased to 42.3720 trillion won by the end of last month due to bad debt write-offs and other factors.
According to the Financial Supervisory Service (FSS), the balance of insurance contract loans reached an all-time high of 71.6 trillion won at the end of last year. The balance has been on a continuous rising trend, increasing from 68.1 trillion won at the end of 2022 to 71 trillion won by the end of 2023. As the arrears rate rises, credit card companies plan to strengthen soundness management, which they began last year.