As the government strengthens its management of household debt, banks are tightening internal controls by reducing credit loan limits and enhancing scrutiny. In contrast, credit card companies continue to market card loans to high-credit borrowers. This situation has led to an expansion of card loans, despite the government's intention to curb household debt, as regulations focus primarily on the banking sector.
According to the financial sector on June 23, some credit card companies have continued their marketing efforts, including sending text messages about long-term card loans. They are advertising preferential interest rates of 4-5% and limits of up to 50 million won for high-credit borrowers.
This strategy appears to target the changing loan market due to stricter lending regulations in banks. As the barriers to bank loans rise, an environment has been created for high-quality borrowers to shift toward credit card companies.
In fact, the average funding rate for card loans from eight major credit card companies (Shinhan, Samsung, Hyundai, KB Kookmin, Lotte, Woori, Hana, and BC Card) was 4.24% in May, up from 2.81% in the same month last year. However, the average interest rate for card loans to borrowers with credit scores above 900 dropped by 0.25 percentage points to 10.98% during the same period. This decline in rates for high-credit borrowers, despite rising funding costs, signals that credit card companies are actively seeking to attract quality borrowers.
This trend is also reflected in the card loan balance. As of the end of last month, the card loan balance for nine credit card companies reached 43.2534 trillion won, setting a new record high after two months. This figure represents a 1.4% increase (5.963 billion won) compared to the end of May last year (42.6571 trillion won).
However, there are concerns about a 'balloon effect' where demand shifts to the second financial sector due to differences in loan management practices between sectors. Although credit card companies are subject to overall household loan management, they do not face the same detailed management measures, such as reducing credit loan limits, as banks do. Consequently, some high-credit borrowers who have exhausted their bank limits are naturally turning to card loans.
From the perspective of credit card companies, attracting high-quality borrowers can positively impact their stability management. Especially in a climate of increasing economic uncertainty and the growing importance of managing delinquency rates, a higher proportion of borrowers with repayment capacity can reduce the risk of defaults. However, if household debt management continues to focus on banks, there is a concern that the increase in non-bank loans could lead to negative side effects.
A financial sector official stated, "Credit card loans only need to comply with the household loan management levels set by financial authorities, so each credit card company is adjusting their handling scale accordingly. It appears that marketing targeting high-credit borrowers is also taking place as bank loan limits are reduced."
* This article has been translated by AI.
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