Credit Card Delinquency Rate Reaches Highest in 10 Years, Threatening the Economy of Ordinary People
In the first quarter of this year, the delinquency rate of credit card companies has reached its highest level in nearly a decade, raising alarms for the economy of ordinary people. Concerns are growing that the repayment capacity of vulnerable groups, such as self-employed individuals, has reached its limit.
According to the financial sector, the delinquency rates of major credit card companies as of the end of March have all increased. Hana Card's delinquency rate at the end of the first quarter was 2.15%, the highest since its inception in 2014.
This figure marks an increase of 0.21 percentage points compared to the same period last year and an increase of 0.28 percentage points from the previous quarter.
The delinquency rates of KB Kookmin Card and Shinhan Card also reached 1.61%, the highest since 2014 and 2015, respectively. Woori Card's rate increased by 0.40 percentage points compared to the same period last year and by 0.43 percentage points from the end of last year, reaching 1.87%.
Small business owners and the self-employed are struggling under debt, pushing them toward a "credit delinquency" crisis.
According to data submitted to Congress by the Democratic Party's Lee Kang-il, as of the end of last year, the number of individual business owners registered as "credit watch" with the Korea Credit Information Services has increased by approximately 28.8% year-on-year to 140,129.
Warnings have also been raised regarding the loan soundness of self-employed individuals. It has been reported that more than half of self-employed individuals who borrowed from financial institutions are multi-debtors. The loan amount held by multi-debtors among individual business owners accounts for approximately 61.3% of the total.
Those unable to obtain bank loans are turning to the second financial sector. Self-employed individuals who have borrowed only from non-bank sectors have risen by about 7% compared to last year.
Along with the heightened burden of interest, delinquency rates are also surging. According to the Bank of Korea, the delinquency rate on loans to self-employed individuals approached the long-term average level before COVID-19 as of the end of last year.
As of the end of February, the delinquency rate on loans to small and medium-sized enterprises in the banking sector, as compiled by the Financial Supervisory Service, recorded its highest level in about eight years, signaling a warning.
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