Credit Card Loans Soar to Record High

Credit card loans surpassed a record W30 trillion last year, and Koreans have on average 4.1 credit cards (US$1=W1,129).

The reason for the surge is that more and more people borrowed money to stay afloat during the coronavirus epidemic or get on the bandwagon of the recent stock or cryptocurrency investment craze.

Just before the infamous credit card bubble burst in 2003, Koreans had on average 4.8 credit cards. According to data from the Financial Supervisory Service on Sunday, credit card loans totaled W32.5 trillion last year, up a whopping 10.1 percent from the previous year and the highest on record.

The biggest increase was among debtors in their 20s with 19 percent, followed by borrowers in their 60s with 17 percent. The average interest was 13 percent, more than four times higher than on a bank loan.

Around 2.6 million Koreans borrowed money on their plastic and most of them had poor credit ratings. One credit card company staffer said, "Small business owners who were crippled by the epidemic and people who invested in cybermoney or stocks appear to have borrowed a lot of money on their credit cards."

Many were already indebted to several banks and other financial institutions. Suh Jung-ho at the Korea Institute of Finance said, "Heavily indebted people who borrow money to pay for other debts are playing with a ticking time bomb that can explode once a lender stops extending the maturity on loans."