[Debt-ridden Twilight]② Elderly Using 'Card Loans and Revolving Credit' to Cover Debts... Delinquencies Double, Surpassing Youth

Hidden Behind the Youth: The More Serious Financial Situation of the Elderly Compared to Young Adults

Card Loan Balances and Delinquencies, Revolving Balances and Delinquencies
The Fastest Growth Rate Among All Age Groups Is for Those Aged 60 and Over

On the 30th, middle-aged men gathered in small groups at Tapgol Park in Jongno-gu, Seoul. Photo by Jinhyung Kang aymsdream@

Lee Jin-soon (62), who lives in Ulsan, worked at a restaurant while taking care of her sick husband and paying for her child’s academy fees as they prepared for employment. Although she had an income of 2.5 million won per month, it was difficult to even pay the loan interest from secondary financial institutions such as savings banks and private lenders. She was barely managing credit card payments by borrowing from one card to pay another, and when she had no money, she used revolving credit. The principal loan amount was about 40 million won, but due to overdue interest, the total debt exceeded 60 million won. Lee said, "I am over sixty and my legs hurt, so I can no longer work," adding, "I can no longer repay my debts." She is preparing to file for personal bankruptcy and is barely getting by with help from the local administrative welfare center.

Increasing Number of Elderly Turning to High-Interest Secondary Financial Institutions

More elderly people are turning to high-interest loans such as card loans. The number of elderly who cannot repay their card bills and resort to revolving credit (carrying over part of the payment to the next month) is also increasing. Although this is not a problem limited to the elderly, the deterioration among those aged 60 and over is clearly the fastest across all age groups.

According to the status of 'Card Loan Balances by Age' submitted by the Financial Supervisory Service to the office of Assemblyman Kim Sung-joo of the National Assembly’s Political Affairs Committee on the 6th, the card loan balance for those aged 60 and over was 6.918 trillion won (as of the end of June). Compared to June 2019, just before the outbreak of COVID-19 (4.055 trillion won), this is a 71% increase. During the same period, the 50s increased by 38% (8.179 trillion won → 11.315 trillion won), the 20s by 27% (924 billion won → 1.175 trillion won), and the 40s by 11% (9.896 trillion won → 11.013 trillion won). The 30s, however, decreased by 15% (5.179 trillion won → 4.426 trillion won). Compared to other age groups, the card loan growth rate for those in their 60s is notably faster.

The increase in overdue card loan amounts for those aged 60 and over was also the largest compared to other age groups. Between June 2019 and June this year, it rose by 49 billion won (89 billion won → 138 billion won). For those in their 50s, it increased by 34 billion won (182 billion won → 216 billion won), for the 20s by 10 billion won (26 billion won → 36 billion won), and for the 40s by 7 billion won (238 billion won → 245 billion won). Conversely, the 30s saw a decrease of 17 billion won (140 billion won → 123 billion won).

The revolving credit balance carried over for those aged 60 and over doubled, rising from 322 billion won to 654 billion won. The overdue amount of unpaid revolving credit also increased 2.3 times for those aged 60 and over (7 billion won → 16 billion won). Among all age groups, those aged 60 and over were the only group whose revolving credit balance and delinquency rate more than doubled.

Elderly Without Income More Vulnerable to High Interest Rates and Economic Downturn

A financial industry official explained, "Revolving credit is not simply dividing the payment amount into installments. It is a method where part of the payment amount is borrowed from the card company under the name of revolving credit and repaid along with interest, with interest rates comparable to card loans." According to the Credit Finance Association, as of the end of September, the average interest rate for card loans from eight major card companies was 14.07%, while the average revolving credit interest rate reached 16.55%.

Kim Mi-ru, a research fellow at the Korea Development Institute (KDI), said, "For those aged 60 and over, many have insufficient assets saved after retirement, no income, or operate irregular self-employment," adding, "the prolonged high interest rates and delayed economic recovery are worsening the debt situation of the elderly." She further analyzed, "Primary financial institutions mainly lend to high-credit borrowers, while relatively vulnerable people aged 60 and over are pushed to secondary financial institutions, worsening their debt structure."