[Ki Ha-young's Life Card] 'Haetsalron Card' Offering 2 Million KRW Monthly for Low Credit Borrowers Released

'Haetsalron Card' Scheduled for Release in the Second Half of This Year
Applicants in the Bottom 10% Credit Score Can Apply After Completing Over 3 Hours of Credit Management Education
Monthly Usage Limit Up to 2 Million KRW

Is there anyone these days without at least one credit card? In modern society, anyone who wants can have a card. Credit cards have brought unparalleled convenience to daily life. Now, wherever you go, you can easily see people paying with credit cards or smartphones. As demand has increased, cards with various benefits are being released almost daily. In response, Asia Economy delivers diverse stories related to cards?ranging from introductions of new cards, behind-the-scenes industry insights, to guides for card beginners?through its weekly 'Cards in Daily Life' section, covering topics inseparable from our consumer lifestyle.

This second half of the year, a credit card for low-credit individuals, who have found it difficult to obtain credit cards until now, is scheduled to be launched. Known as the 'Haetsalron Card,' it is part of the Financial Services Commission’s announced 'Policy for Restructuring Supply Systems of Financial Services for the Underprivileged,' a follow-up measure to the maximum interest rate reduction implemented from July.

The Haetsalron Card is a policy financial product planned by the Financial Services Commission to provide card usage benefits to low-credit individuals with a credit score of 680 or below (based on NICE standards, equivalent to past credit grade 7 or lower) who do not meet the credit card issuance criteria. Those in the bottom 10% of credit scores can apply for the Haetsalron Card after completing at least three hours of credit management education. Of course, income verification is required.

The usage limit of the Haetsalron Card is up to 2 million KRW per month. However, usage is restricted for cash advances, card loans, and seven major industries (general entertainment bars, dance entertainment bars, other bars, hygiene industries, leisure industries, gambling industries, and other industries).

Haetsalron Card users will be offered benefits such as billing discounts based on usage amounts and interest-free installments. For example, spending 300,000 KRW could result in a billing discount of up to 10,000 KRW. The financial authorities are currently in discussions with the card industry regarding these benefits.

The Financial Services Commission plans to develop a repayment willingness index considering repayment history, financial education, and credit management consulting to differentiate the guarantee limits for Haetsalron Card payments. Card companies will set individual credit payment limits according to the guarantee limits established by the Financial Services Commission.

The guarantee fund will be prepared from the government budget along with contributions from banks, insurance companies, card companies, savings banks, and mutual finance industries, forming a fund for financial services for the underprivileged. Last month, the amendment to the Financial Services for the Underprivileged Support Act, which requires all financial sectors to bear the costs necessary for operating financial products for the underprivileged, passed the National Assembly’s Political Affairs Committee.

While the Haetsalron Card’s purpose of expanding financial product choices for vulnerable low-income groups is commendable, the card industry is concerned about delinquency rates. Regarding these concerns, Eun Sung-soo, Chairman of the Financial Services Commission, stated, "Since the guarantee ratio will be operated at 100%, the burden on the card industry in case of delinquency will be very low." This means that if a low-credit individual fails to repay the card debt after using the Haetsalron Card, the Korea Inclusive Finance Agency will repay it on their behalf. The agency’s funds are sourced from contributions from all financial sectors, including card companies.

The Haetsalron Card prompts reflection on the essence of credit cards, which are products issued based on credit. While the intention as a policy for financially vulnerable individuals is good, more delicate solutions seem necessary to address the risks of providing products to low-credit individuals without credit. Although the government budget will cover these risks, if defaults increase, the losses for private financial companies that contributed will also grow, and government finances will ultimately come from the public’s pockets.