High Credit Borrowers' Rates Drop 3.41%p in 6 Months... Card Loan Interest Rates Also Show 'Polarization' (Comprehensive)

Standard Loan Interest Rate Disclosure for 6 Months
Loan Rates for High Credit Borrowers in Grades 1-2 Decrease
Double-Digit Rates Persist for Low Credit Borrowers

[Asia Economy Reporter Ki Ha-young] Six months after the card loan interest rates were disclosed based on the standard credit rating, the gap between the rich and the poor in interest rates has deepened further. While the loan interest rates offered to high-credit borrowers in grades 1-2 have decreased, the rates for low-credit borrowers remain stagnant at double-digit high levels. This suggests that card loans, mainly used by middle- and low-credit borrowers, are becoming increasingly favorable only to high-credit borrowers, making it harder for low-credit users to access them.

Minimum 6.25% for High-Credit Borrowers, Minimum 18.90% for Low-Credit Borrowers

According to the disclosure by the Korea Federation of Credit Finance Companies as of the end of November, Woori Card offered the lowest average interest rate of 6.25% for grades 1-2. In October, Woori Card also provided the lowest rate of 6.45% for the same grades, which is 0.2 percentage points higher than the current rate. Following Woori Card, IBK Industrial Bank Card (7.62%) and Samsung Card (8.42%) offered relatively favorable card loan rates to high-credit borrowers.

Since July, the Korea Federation of Credit Finance Companies has standardized internal credit ratings of card companies into a 10-grade system based on default rates to prevent interest rate reversals caused by marketing. They disclose ▲base price (non-discounted rate) ▲adjusted rate (discounted rate) ▲operating rate (final rate). The default rate refers to the probability of being overdue for more than 90 days within one year from the loan issuance date.

For low-credit borrowers in grades 9-10, DGB Daegu Bank Card has offered the lowest interest rate of 18.90% for five consecutive months since July. In the previous month, five card companies provided card loans to grades 9-10, including DGB Daegu Bank Card, Samsung, KB Kookmin, Hyundai, and Citibank cards. Citibank Card was at 19.88%, Hyundai Card at 22.01%, KB Kookmin Card at 22.05%, and Samsung Card at 22.70%, respectively.

The card loan interest rates for grades 1-2 have been decreasing for six months since the standard grade disclosure began in June. The rates sequentially dropped from ▲9.66% (Samsung) in June ▲7.87% (IBK Industrial Bank) in July ▲7.46% (Woori) in August ▲6.54% (Woori) in September ▲6.45% (Woori) in October ▲6.25% (Woori) in November. This is a decrease of about 3.41 percentage points over six months. On the other hand, the lowest interest rate offered to low-credit borrowers in grades 9-10 has remained at 18.90% by DGB Daegu Bank Card since July.

While interest rates for high-credit borrowers are decreasing, low-credit borrowers have fewer borrowing options and continue to face high interest rates. Notably, due to tightened lending by first-tier financial institutions, the number of high-credit customers using card loans primarily utilized by middle- and low-credit borrowers in grades 4-6 has significantly increased. As of October, 32.66% of Woori Card loan users received interest rates below 10%. Additionally, a minus card product for high-credit borrowers has emerged. Woori Card operates the Woo Card Minus Loan, offering card loans in the range of 4-10% to high-credit borrowers.

Seven Major Card Companies Slightly Raise Card Loan Interest Rates as of End of November

Meanwhile, as of the end of November, the average card loan interest rates (operating price) based on standard grades for seven major card companies (Shinhan, Samsung, KB Kookmin, Hyundai, Lotte, Woori, Hana Card) ranged from 11.25% to 14.63%. The average for the seven companies was 13.26%, up 0.02 percentage points from 13.24% the previous month. Among the seven card companies, Shinhan, Woori, and Hana Card lowered their rates compared to the previous month, while Samsung, KB Kookmin, Hyundai, and Lotte Card raised theirs.

Woori Card had the lowest rate at 11.25%, down 0.39 percentage points from the previous month. Following were Hyundai Card, which rose 0.47 percentage points to 12.73%, and KB Kookmin Card, which increased 0.04 percentage points to 13.20%. Hana Card decreased 0.27 percentage points to 13.37%, and Lotte Card rose 0.01 percentage points to 13.52%. Shinhan Card and Samsung Card recorded 14.10%, down 0.11 percentage points, and 14.63%, up 0.37 percentage points, respectively.

This content was produced with the assistance of AI translation services.