Jin Sun-mi "Middle-aged and elderly, negative balance in overdraft accounts despite high interest rates... Concerns over defaults during interest rate hike period"

Q3 Negative Balance in Overdraft Accounts Increases Among 50s and 60s... Other Age Groups See Decrease
"Proactive Management Needed to Prevent Spillover to Overall Financial Market"

[Asia Economy Reporter Oh Ju-yeon] Despite the interest rate hikes, middle-aged people in their 50s and seniors aged 60 and above are still drawing funds from their overdraft accounts.

According to the 'Overdraft Account Status by Age Group' data submitted by the Financial Supervisory Service to Jin Sun-mi, a member of the Democratic Party of Korea, as of the end of August this year, the number of overdraft accounts reached 3,007,000, with a balance of 45.0199 trillion won.

Among these, the number of overdraft accounts held by people in their 50s was 890,000, and those aged 60 and above had 544,000 accounts. The overdraft balance for the 50s was 12.186 trillion won, and for the 60s, it was 3.2482 trillion won, showing an increase of 0.05% and 0.7% respectively compared to the second quarter.

Overdraft accounts had shown significant growth over the past three years but have recently been declining as interest rates have sharply increased.

Compared to the end of last year, the total number of overdraft accounts decreased by 3.3% (3.111 million accounts → 3.007 million accounts) by the end of August this year, and the balance decreased by 8.4% (49.1585 trillion won → 45.0199 trillion won).

In particular, the scale of overdraft accounts among people in their 20s significantly shrank; during the same period, the number of accounts decreased by 16.5% (121,000 accounts → 101,000 accounts), and the balance dropped by 28.6% (2.2427 trillion won → 1.6009 trillion won).

In contrast, the decline among those in their 50s and 60s was much more gradual.

The number of accounts for people in their 50s decreased by 1.1% (900,000 accounts → 890,000 accounts), and the balance only fell by 2.6% (12.5151 trillion won → 12.186 trillion won). For those in their 60s, the number of accounts increased by 1.7% (535,000 accounts → 544,000 accounts), while the balance decreased by 1.4% (3.2936 trillion won → 3.2482 trillion won).

Jin’s office analyzed that despite the increased interest burden due to the rate hikes, demand remains strong due to financial hardship and other factors.

Jin said, "As interest rates rise sharply, borrowers’ interest burdens increase significantly, raising concerns about potential defaults. We need to closely examine the causes of loans and the possibility of defaults to proactively manage the situation and prevent it from escalating into a crisis across the financial market."