The delinquency rate for bank credit card loans, encompassing both cash advances and card loans, has experienced a notable surge in recent times. (Image courtesy of Yonhap)
SEOUL, Nov. 15 (Korea Bizwire) – The delinquency rate for bank credit card loans, encompassing both cash advances and card loans, has experienced a notable surge in recent times.
As per a report from the Bank of Korea on Tuesday, the delinquency rate for credit card loans at general banks—encompassing both commercial and regional banks—reached 2.9 percent by the end of August.
Bank card borrowers often find themselves grappling with multiple debts, and a significant proportion of them, particularly vulnerable borrowers using credit cards for emergency needs, have contributed to this rise. This underscores the lingering impact of prolonged high interest rates.
“Although card loans constitute a smaller portion of household loans,” noted an official from a commercial bank, “the growing number of customers defaulting on even these relatively small loans is a concerning indicator.”
The figure, based on principal delinquencies extending beyond one day, witnessed a 0.9 percentage point increase within a year, rising from 2 percent in the same month last year. This marked the highest delinquency rate in eight years, although it failed to surpass the 3.1 percent recorded in August 2015. Even after factoring in seasonal variations, the rate remains notably elevated.
The delinquency rate for credit card loans at general banks gradually decreased from a peak of 3.4 percent in November 2014 to 1.8 percent in September of last year.
However, starting at 2.2 percent in January of this year, the rate surged to 2.5 percent in February and 2.7 percent in May, before climbing to nearly 3 percent in the latter half of the year.
As of the end of August, the delinquency rate for household loans at general banks stood at 0.4 percent, the highest in four years. Meanwhile, the delinquency rate for corporate loans was 0.5 percent, the highest in three years and three months, although still lower than the delinquency rate for card loans.
One plausible interpretation of these trends is that the overall increase in the delinquency rate of bank loans can be attributed to a particularly sharp rise in the number of ordinary individuals struggling to meet their credit card obligations promptly.
Ashley Song (ashley@koreabizwire.com)
