South Korea’s Credit Card Debt Crisis: Shinhan Card Tops the List with a Whopping 435.9 Billion Won in Debt
Hyundai Card’s Bad Debt Expense Soars by 55.16%: A Growing Concern in the Credit Card Industry
Credit card companies’ bad debt expenses in the first half of the year have exceeded 2 trillion won for the first time ever, sparking concerns about the industry’s financial health. According to the card industry, the bad debt expenses of the seven professional card companies (Shinhan, Samsung, Hyundai, KB Kookmin, Lotte, Hana, and Woori Card) amounted to KRW 2.2408 trillion, a 22.12 percentage point increase from the same period last year.
What is Bad Debt Expense?
Bad debt expense is the amount that a credit card company has processed as a loss because it has judged that it cannot recover a loan, such as a card loan, after the delinquency period has become long. This expense has been maintained at the level of 2 trillion won per year but has increased rapidly to over 4 trillion won last year.
Hyundai Card Leads the Increase in Bad Debt Expense
Hyundai Card ranked first in the increase rate of bad debt expense, with a 55.16% increase compared to last year. Lotte Card followed with a 17.46% increase, while Shinhan Card, KB Kookmin Card, and Woori Card also saw significant increases. On the other hand, Samsung Card and Hana Card saw their bad debt expenses decrease compared to the previous year.
Delinquency Rate Reaches an All-Time High
The average delinquency rate in the card industry in the first half of the year was 1.69%, a 0.06 percentage point increase from the previous year. This increase in credit card company bad debt provisions and the rise in credit card delinquency rates mean that credit card companies have increased their bad loans.
Growing Demand for Card Loans
As mutual finance companies such as savings banks and Saemaul Geumgo narrow their lending to vulnerable groups, the demand for loans from ordinary citizens who turn to card loans continues to increase. The balance of card loans compiled by the Credit Finance Association remains at an all-time high of 41.2266 trillion won.
Financial Authorities to Monitor Credit Loan Trends
Financial authorities plan to keep an eye on whether the balloon effect will appear in secondary financial sector credit loans such as card loans. A financial authority official stated that they will monitor the trend and consider reducing the card loan limit if demand for “yeonggeul” (loans that involve gathering even one’s soul) is detected.