This year, the long-term card loans (card loans) of nine card companies increased by more than 11 trillion won in just three months. In addition to card loans, cash services, regarded as the last bastion of recession-type loans, also saw significant growth. Financial authorities are concerned that the surge in card loans and cash services may lead to issues with the financial soundness of card companies, prompting them to strengthen limit management.
According to the monthly utilization data from the Credit Finance Association as of the 26th, the cumulative annual amount of card loans from nine domestic card companies (Lotte, BC, Samsung Card, Shinhan, Woori, Hana, Hyundai, KB Kookmin, and NH Nonghyup Card) was recorded at 14.7994 trillion won last month. At the end of January this year, card loans amounted to 3.7425 trillion won, and increased by an average of 3.6 trillion won each month, up 11.0569 trillion won by the end of last month. Looking at the increase, Samsung Card saw the largest rise at 2.2692 trillion won, followed by Shinhan Card with an increase of 2.2102 trillion won. The card loan balance, which had been slightly reduced last month due to bond write-offs, has returned to an increasing trend at 42.5005 trillion won.
The rise in cash services is also steep. The cumulative amount of cash services, which was 4.3377 trillion won at the end of January this year, increased to 18.9434 trillion won by the end of last month. Over three months, it has increased by about 14.6 trillion won, almost 5 trillion won each month. Compared to an increase of about 12 trillion won during the same period last year, this year has seen an increase of more than 2 trillion won.
Cash services have a more lenient loan screening process compared to card loans, but the average interest rate is 18%, and the loan period is also short at one month, making it a last resort for urgent living expenses or to avoid arrears. As high inflation persists and interest rates remain low, the household economy is becoming difficult, leading individuals to utilize cash services for small amounts beyond card loans due to increased thresholds for loans from first-tier banks and savings banks.
Financial authorities are ensuring thorough financial management within the card industry. Recently, Hyundai Card was instructed to monitor the soundness status of card loans and strengthen limit management through a regular inspection. It was pointed out that the speed at which Hyundai Card's card loan balance is increasing is much faster than other card companies, and there is a forecast within the card industry that additional soundness management issues may arise for other card companies.
Moreover, the three-phase stress debt service ratio (DSR) that will be implemented in July will for the first time apply stress interest rates to other loans, including card loans and cash services. The stress DSR is a system that reduces the loan limit by imposing an additional charge when calculating the DSR, and the authorities are collecting industry opinions regarding how to apply the stress interest rate to other loans.
In particular, financial authorities are reportedly considering implementing stress interest rates on card loans and cash services immediately upon new issuance, regardless of the loan amount. For credit loans, it has been decided that a 1.5% stress interest rate will apply if the balance exceeds 100 million won, but for card loans and cash services, a 1.5% stress interest rate will be applied immediately upon new issuance, regardless of the amount.
If the three-phase stress interest rate is applied, the limits for card loans and cash services available to low- and medium-credit borrowers are inevitably likely to decrease. Nevertheless, the consideration by financial authorities to apply the stress interest rate regardless of the loan amount is aimed at controlling the pace of increase in card loans, according to consensus within the card industry. Since last year, financial authorities have instructed the card industry to manage card loans to control the overall household loan total.
A card industry official noted, "Not only card loans but also payment revolving risk management are areas where financial authorities are urging overall soundness management in the card industry," and added, "This year, it seems we should concentrate more on managing arrears and soundness than on business expansion."