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As the base interest rate is frozen, the attention of medium credit creditors is focused on whether or not the interest rate on card loans will be cut. The credit card industry is predicting that it will be difficult for interest rates on credit card loans to fall this month. However, the financial sector expects a reduction in interest rates next month at the earliest.
According to the financial industry on the 17th, the interest rate on AA+/3-year bonds, which had been held at 3% per annum at the beginning of this month, rose to 4% per annum. At the end of February, the card loan interest rates of seven domestic credit card companies (Shinhan, Samsung, KB Kookmin, Lotte, Hyundai, Woori, and Hana Card) were 14.91%. Compared to December last year, this is a decrease of around 2 percentage points (p). It is expected that the credit card loan interest rate will also decrease as the cost of financing decreases.
Credit card companies raise money by issuing loans, and when interest rates on loans fall, credit card company lending rates are expected to fall as well. The interest rate on loans, which debited at 5.55% this year, fell to 3.84% this month.
Falling spreads (spreads) also have a positive effect on lowering card lending rates. As the market for high quality debentures used by credit card companies to raise funds recover credit, it shows movements similar to the range of fluctuations in market interest rates. At the start of this year, the bond spread narrowed from 179bp (1bp = 0.01 percentage point) to 63bp this month.
The financial industry expects that if this trend continues, a reduction in interest rates on credit card loans will appear. It is interpreted that the spread will continue to decrease as the credit of the stationary bonds recovers following the freezing of the base rate.
It is analyzed that the refinancing loan platform announced for release next month will also have an effect on reducing the interest rate of card loan. 2 It is very likely that lending rates will be adjusted to improve competitiveness as refinancing loans are anticipated for medium credit borrowers in the financial sector.
On the other hand, the card industry expects only a slight adjustment. This is because the base interest rate remains frozen. Credit card companies usually use funds raised three to four months ago to manage financial products. Even if the financing burden is relieved, it cannot be applied to the card loan interest rate immediately. It is said to already be giving out loans with money raised after resolving debts.
Whether the US Federal Reserve raises its benchmark interest rate is also a risk. Even if the domestic base rate rises by one notch, an increase in financing costs is inevitable. It is difficult to reduce lending rates in a hurry in a situation where the upward trend in the United States has not been broken.
However, you can change your marketing strategy. As the acquisition cost is alleviated, the ability to lower the borrowing threshold has been created. There is plenty of potential to increase marketing targeting low and medium credit customers again.
Originally, credit card loans were called ’emergency windows for the common people’ and focused on loans for low and medium credit rather than high credit. However, credit card companies focused on securing high credit borrowers last year to manage soundness.
An official in the card industry said, “Card loan interest rates are coming down seriously this year, but there will only be minor adjustments within 1%c left.”
