The amount of overdue credit card debt has surpassed 2 trillion won. In particular, the rapid increase in debt among people in their 20s is drawing attention.
First Time Credit Card Overdue Debt Exceeds 2 Trillion Won Since 2014... 'Roll-over Payments' Increase and Number of Debtors in Their 20s Rises
According to the Financial Statistics Information System on the 8th, the total amount of overdue credit card debt (based on more than 1 month overdue) at eight domestic card companies (Shinhan, Samsung, Hyundai, KB Kookmin, Lotte, Woori, Hana, and BC Card) as of the end of the third quarter last year was 2.0516 trillion won. This is a staggering 53.1% (711.8 billion won) increase compared to the same period last year (1.3398 trillion won). This is the first time since 2014 that the overdue amount has exceeded 2 trillion won.
The amount of credit card debt overdue for less than one month, which is known to have a relatively high recovery rate, also reached its highest level in five years (596.1 billion won) since the third quarter of 2013 (724.4 billion won). This is interpreted as a result of worsening household financial conditions due to prolonged high interest rates, economic downturn, and inflation, making it difficult for many to repay their card bills on time.
A bigger problem is the increase in 'roll-over payments.' The balance of 'card loan refinancing loans,' a product where people who have overdue card loans borrow again to repay the previous card loan, reached 1.596 trillion won as of November last year, a 49.6% increase compared to the same period the previous year.
The balance of revolving credit service, where only part of the credit card usage amount is paid and the rest is carried over, is also continuing its high growth. While it can alleviate sudden debt burdens, the interest rate exceeds 15% per annum, and if mismanaged, the debt can snowball. The revolving credit balance surpassed 7 trillion won for the first time in September 2022 and has steadily increased since, maintaining the 7 trillion won level.
Particularly, attention should be paid to the financial situation of people in their 20s, who will lead future generations. The revolving credit balance of people in their 20s, which was 305.2 billion won at the end of 2017, increased to 564 billion won as of the end of March last year. Card loans also increased by 27% compared to the end of 2019 as of the first half of last year. The overdue amount on card loans also increased by 10 billion won.
Additionally, as of the end of June last year, the delinquency rate on credit loans for people in their 20s was 1.4%, double the 0.7% of the same period the previous year. The overdue amount on non-face-to-face loans (personal credit loans) for those aged 20 and under at the three internet banks (KakaoBank, K Bank, Toss Bank) in the second quarter (April to June) reached 58.7 billion won. Their delinquency rates were 2 to 3 times higher than other age groups.
In fact, the number of personal workout (debt adjustment) applicants aged 20 and under in the first half of this year was 4,654, the highest since 2018. Some interpret this situation as an increase in delinquency rates among young people in their 20s due to indiscriminate lending to those without stable sources of income.
Credit Card Payment Overdue Information Shared After 20 Days of Delay... Records Remain for Up to 5 Years
When credit card payments are overdue, notifications are sent via text or messenger by the 5th business day to inform the customer of the overdue status. However, from the 6th day onward, the card company can suspend the credit card, and the risk of credit score decline increases. After about 20 days to one month of overdue, the overdue information is transferred to the 'debt collection department,' and overdue information is shared with financial institutions. This can make it difficult to obtain loans from first-tier financial institutions.
If three months pass after the overdue date based on business days, the card company issues a 'loss of benefit' notice. This means the card company cancels the customer's installment or various card usage contracts and collects the payment in a lump sum. The card company may also file a payment order lawsuit, and if a court judgment is issued, the debtor's salary or bank account may be seized. This results in the individual becoming a credit delinquent or defaulting debtor.
Some companies restrict employment for such individuals. Representative examples include financial companies, security companies, loan managers, and insurance planners. These companies require consent for credit rating checks or enrollment in identity guarantee insurance upon hiring.
Once an overdue record remains, it is not easy to remove the stigma. Overdue records remain for up to five years, during which it is difficult to get a new card issued from other card companies. Additionally, credit scores drop significantly, and even if one urgently needs a loan, financial institutions may refuse.
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