Credit Card Loans and Cash Advances Surge Over 50% in South Korea, Sparking Credit Risk Concerns in Card Industry

Credit card loans and cash advances in South Korea surged more than 50% in March, raising concerns about rising credit risk in the card industry.

According to data from the Credit Finance Association, card loan usage at nine major credit card companies rose to 11.44 trillion won ($8.4 billion) in March from 7.42 trillion won ($5.4 billion) in February, an increase of about 54%.

Outstanding card loan balances reached 42.99 trillion won ($31.5 billion), up slightly from the previous month and marking a third straight month of increases.

The sharp rise reflects growing demand for short-term, high-interest borrowing as households face persistent inflation and a slowing economy, while tighter bank lending standards push lower-credit borrowers toward credit cards as a last resort.

Industry officials warned the trend could signal deteriorating asset quality, as card loans typically carry higher default risks.

Delinquencies are already rising. Data from the Bank of Korea showed the delinquency rate on credit card loans at commercial banks reached 4.1% at the end of January, the highest level since May 2005.

Loans overdue for more than six months – widely considered difficult to recover – also surged, rising 84% last year to 470.8 billion won ($345 million).

While higher loan volumes can boost interest income, industry officials said the increasing share of low-credit borrowers and longer delinquency periods could weigh on profitability due to higher provisions for bad loans.

Among card issuers, Samsung Card recorded the largest loan volume in March at 2.22 trillion won ($1.6 billion), while Hyundai Card posted the biggest monthly increase.

In addition to card loans, cash advance usage also saw a significant increase, rising by 56% month-on-month to 12.48 trillion won ($9.1 billion).