[Gi Ha-yeong's Life Card] Cash Services: Woori for Low Credit, Hyundai Advantageous for High Credit

Cash Service Interest Rates, First Disclosure Based on Credit Scores

Is there anyone these days without at least one credit card? In modern society, anyone can have a card if they want. 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, which are inseparable from our consumer life, through the weekly 'Cards in Daily Life' corner, including introductions to new cards, behind-the-scenes industry stories, and guides for card beginners.

For the first time, cash service (short-term card loan) interest rates have been disclosed based on credit scores instead of credit grades. The Korea Federation of Credit Finance Companies recently announced cash service interest rates for the first quarter based on credit scores from credit rating agencies. This change came as the credit evaluation system, which serves as the standard for card services, shifted from a grading system to a scoring system starting this year. The system subdivides the previous 1 to 10 grades into scores from 1 to 1000 to lower the financial service barriers caused by the grading system.

Since January this year, the credit card issuance criteria have changed from the previous 6 grades or higher to a NICE Information Service credit score of 680 or higher, or a Korea Credit Bureau (KCB) score of 576 or higher. Meanwhile, card loan (long-term card loan) interest rates have been disclosed based on scores rather than grades since the end of January.

Among the seven major credit card companies (Shinhan, Samsung, KB Kookmin, Hyundai, Lotte, Woori, Hana), as of the end of March, financial consumers with credit scores exceeding 900 found Hyundai Card to offer the most favorable cash service rates. Hyundai Card provided the lowest interest rate of 11.2% among the seven companies. This rate is 3.2 percentage points lower than Woori Card’s 14.4% rate offered to customers with credit scores above 900.

Following Hyundai Card, Hana Card (11.75%) and Samsung Card (12.16%) offered relatively favorable rates to high-credit consumers with scores over 900.

For financial consumers with scores between 501 and 600, corresponding to the previous 6-grade credit card issuance standard, the seven major credit card companies offered similar rates ranging from 20.09% to 21.89%. Lotte Card provided the lowest rate at 20.09%, followed by Woori Card (20.41%) and Shinhan Card (20.61%).

Even financial consumers with scores below the credit card issuance standard were able to use cash services. All major credit card companies provided cash services to consumers with scores below 300. Among them, Woori Card offered the lowest rate at 18.19%, while Hyundai Card recorded the highest rate at 22.48%.

The average cash service interest rate has been decreasing compared to last year. As of the end of March, the average cash service interest rates (operating prices) for the seven major credit card companies based on standard grades ranged from 17.90% to 19.19%. The standard grade is a 10-grade system standardized by each card company’s internal grade based on default probability (the likelihood of being overdue for more than 90 days within one year).

The average rate among the seven companies was 18.58%, down 0.36 percentage points from the 18.94% average at the end of December last year. This reflects proactive measures taken by card companies ahead of the maximum interest rate reduction from 24% to 20% starting in July. It is also interpreted that the interest rate cuts were inevitable due to a decrease in cash service users.

The card company with the highest average cash service interest rate was KB Kookmin Card at 19.19%. Hana (19.08%), Samsung (18.83%), Woori (18.49%), Shinhan (18.36%), and Lotte Card (18.23%) followed. Hyundai Card offered the lowest rate at 17.90%.

From the second half of this year, the maximum legal interest rate for cash services is expected to be lowered from 24% to 20% due to the legal maximum interest rate reduction. The card industry has agreed to apply this retroactively to previous loans. Accordingly, it is expected that the interest burden on existing low-credit customers will decrease. However, since this year, according to the revised 'Standard Terms and Conditions for Individual Credit Card Members,' cash services can only be used if separately applied for when issuing a new credit card, resulting in a decrease in cash service users.

Card companies refer to credit scores from credit rating agencies but determine customer-specific credit scores based on their own standards and provide card loan and cash service interest rates accordingly. If you must use cash services, it is advisable to compare interest rates by card company and inquire to apply the most favorable rate for yourself.