As even savings banks, part of the secondary financial sector, begin tightening lending, more people are falling behind on credit card debt repayments. The photo shows a promotional poster on a wall advertising credit card loans available through non-institutional channels. (Yonhap)
SEOUL, July 25 (Korea Bizwire) — South Korea’s credit card loan delinquency rate at general banks surged to a 20-year high in May, reflecting growing financial distress among vulnerable borrowers amid tightening credit conditions across the banking sector.
According to data released Wednesday by the Bank of Korea, the delinquency rate on credit card loans issued by general banks rose from 3.6% in April to 4.2% in May, the highest level since May 2005, when it reached 5.0%.
General banks in this context refer to regional banks such as Gwangju, Busan, Jeonbuk, and Kyongnam, and exclude major banks like KB Kookmin, Shinhan, Hana, and Woori, which operate separate credit card subsidiaries.
The spike in overdue payments—defined as loans past due by more than one day—includes both short-term cash advances and longer-term card loans. The trend reflects the increasing number of high-risk borrowers who, unable to access loans from either primary or secondary financial institutions, turn to higher-interest card debt as a last resort.
Delinquency rates had hovered in the 3% range since late 2023 but began climbing more sharply in early 2024. The breach of the 4% threshold in May marks a significant shift, analysts say, and highlights the financial fragility of multi-debt holders who have exhausted most other borrowing options.
Adding to the pressure, second-tier lenders such as savings banks have also scaled back new loan issuance in a bid to preserve asset quality. As of May, total outstanding loans by savings banks fell to ₩95.7 trillion, the lowest since October 2021.
“The sharp rise in May can be attributed to worsening economic conditions ahead of the presidential election and an acute liquidity crunch among vulnerable borrowers,” said a commercial bank official.
The data signals rising stress in South Korea’s consumer credit market and adds urgency to ongoing discussions around credit accessibility and household debt risk management.
Ashley Song (ashley@koreabizwire.com)
