Credit card loans have reached unprecedented levels this year. (Image courtesy of Yonhap)
SEOUL, Sept. 19 (Korea Bizwire) – In a sign of growing financial strain on South Korea’s middle and lower-income households, credit card loans, often a last resort for quick cash, have reached unprecedented levels this year.
According to data released on September 18 by the Credit Finance Association, the outstanding balance of card loans, including debt transfers, from nine major credit card companies in South Korea totaled 41.23 trillion won at the end of July. This represents a 6.4% increase, or 2.47 trillion won, from the end of last year.
The surge in card loans comes amid a challenging economic environment characterized by high interest rates and inflation, which have put significant pressure on household finances.
The situation has been exacerbated by savings banks tightening their lending criteria, pushing more consumers towards credit card loans.
The upward trend has been consistent throughout the year, with card loan balances setting new records each month. January saw an increase of 450.7 billion won, followed by rises of 200 billion won in February and 7.8 billion won in March.
The trend accelerated in the second quarter, with April jumping by 482.3 billion won and May surging by 554.2 billion won, reaching 40.52 trillion won. June added another 100 billion won, while July saw the largest monthly increase of 620.6 billion won.
Compared to July 2023, the outstanding balance has grown by 3.04 trillion won, underscoring the rapid pace of accumulation.
Interestingly, while card loans have surged, cash advance balances from the same nine credit card companies have decreased. As of July, cash advance balances stood at 6.7 trillion won, down from 6.89 trillion won in the same period last year.
M. H. Lee (mhlee@koreabizwire.com)
