Card Companies' Urgent Cash Demand Remains... Revolving Credit and Card Loans at 'Maximum'

Revolving Balance Hits Record High of 7.5 Trillion
Card Loans Also Near 36 Trillion... Increased Urgent Cash Demand

The revolving balance, which involves paying only a portion of the credit card bill and carrying over the remaining amount with interest, has reached its highest level this year. Card loans have also increased to nearly 36 trillion won. The demand for quick cash among struggling low-income earners amid high inflation shows no signs of easing.

According to the Credit Finance Association on the 22nd, as of the end of November this year, the revolving balance of eight card companies including Shinhan, Samsung, Hyundai, KB Kookmin, Lotte, Hana, Woori, and BC stood at 7.5115 trillion won. This is an increase of 41.9 billion won compared to the previous month, marking an all-time high. Compared to the end of last year, it has increased by about 238.7 billion won this year. Revolving is a service that allows cardholders to pay only part of their credit card bill and carry over up to 90% of the balance to the next month without any delinquency record. It is considered a quick cash channel mainly used by low-income earners to reduce the burden of lump-sum repayment.

The cash service balance, also mainly used by those needing quick cash, was 6.4462 trillion won as of the end of November, up 218.6 billion won compared to the end of last year. It reached a yearly high of 6.5826 trillion won at the end of October and decreased by 136.4 billion won at the end of November, but remained higher than in other months. Meanwhile, the card loan balance, considered a long-term loan that card companies can provide, reached an all-time high of 35.9609 trillion won. It has increased by more than 2 trillion won this year. This indicates that more people are in need of funds to the extent that they are willing to bear interest rates as high as 18% per annum.

Demand for quick cash is also increasing in insurance companies. According to the Financial Supervisory Service, as of the end of the third quarter this year, the scale of household loans by insurance companies was 134.7 trillion won, an increase of 4.2 trillion won compared to the same period last year. Most of the increase was due to insurance policy loans, which are quick cash loans. The balance of insurance policy loans alone increased by 3.9 trillion won. Insurance policy loans are products that allow borrowers to take out loans amounting to 79-95% of the surrender value without canceling their insurance policies. They can be borrowed without credit checks or screening procedures, so they are mainly used by those with low credit ratings or unstable cash flow.

Authorities are also monitoring the risk of people falling into debt while using quick cash. The Financial Supervisory Service recently issued a consumer alert regarding revolving credit. The agency judged that card companies’ euphemistic use of terms like 'partial payment' for revolving credit actually harms consumers. Continuously postponing card payments through revolving credit rapidly increases interest costs and raises the risk of delinquency. As of the end of last month, the average interest rates for revolving credit at eight card companies ranged from 15.67% to 17.84%. Those with credit scores below 700 must borrow at rates close to the legal maximum interest rate of around 19%.