According to the financial sector on June 21, the average interest rate for card loans offered by eight major credit card companies (Shinhan, Samsung, Hyundai, KB Kookmin, Lotte, Woori, Hana, and BC Card) for borrowers with credit scores over 900 dropped to 10.98% in May, down 0.25 percentage points from 11.23% in the same month last year.
This decline is notable given that the average funding cost for card loans rose from 2.81% to 4.24% during the same period. The funding cost is based on the average interest rate of three-year card bonds calculated by private credit rating agencies such as Korea Asset Management Corporation, KIS Asset Management, and NICE P&I, serving as a key indicator of the overall funding conditions in the card industry. Despite increased cost pressures, loan interest rates have decreased.
The financial sector attributes the drop in card loan rates to the influx of high-credit borrowers into the secondary financial market as banks raise their lending thresholds. In fact, as of April, the outstanding balance of card loans from the eight card companies reached 39.675 trillion won, a 1.5% increase from 39.1024 trillion won at the end of last year.
This "balloon effect" is also evident in the mid-credit loan market. The average interest rate for mid-credit loan products from the eight card companies for borrowers with credit scores between 801 and 900 fell from 10.33% in the first quarter of last year to 9.64% in the first quarter of this year, a decrease of 0.69 percentage points.
By company, Samsung Card saw a drop from 10.18% to 8.67%, a decrease of 1.51 percentage points, while Shinhan Card's rate fell from 10.88% to 9.57%, a drop of 1.31 percentage points. Other companies also experienced declines, including Lotte Card (-0.85 percentage points), BC Card (-0.81 percentage points), KB Kookmin Card (-0.46 percentage points), Hana Card (-0.32 percentage points), Woori Card (-0.16 percentage points), and Hyundai Card (-0.14 percentage points).
Only BC Card (10.39%) and Hana Card (10.29%) had average interest rates exceeding 10% for borrowers in the 800 credit score range. During this period, the volume of mid-credit loans issued surged to 2.5708 trillion won, a 61.4% increase compared to 1.5928 trillion won in the same period last year.
With the increase in loans from secondary financial institutions, the Financial Supervisory Service convened card companies at the end of last month to emphasize the need for stronger household debt and risk management. However, industry insiders report that demand for card loans remains high, with inquiries continuing without any specific marketing efforts.
A representative from the card industry stated, "While authorities are strengthening household debt management, we are seeing a rapid increase in inquiries about card loans in the field."
* This article has been translated by AI.
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