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Credit card loans begin to decline

By Korea Herald

Published : Nov. 9, 2011 - 16:40

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The amount of Korea’s credit card loans declined for the first time in two years amid intensifying pressure from the authorities.

The Financial Supervisory Service and the credit card industry estimate that the total loan balance ― including card loans and cash advance services ― has fallen slightly at the end of September compared to three months earlier.

“Preliminary figures show that most credit card firms saw their loans decline in the third quarter of this year,” said an official from the FSS without elaborating on the total.

The decrease follows a two-year expansion of credit card loans, which amplified concerns about the country’s snowballing household debt at a time when the overall economic outlook remains gloomy in connection with the eurozone debt crisis.

The outlook for the credit card industry is dim. More customers also failed to honor their debt in time, hurt by the protracted economic slump. Credit card firms also recently agreed under pressure to lower the commission rates they charge small restaurants and shops, a move expected to cut into their profits.

Samsung Card’s loan balance reached 3.96 trillion won in end-September, down 3.2 percent from June.

Lotte Card also saw its card loan balance edge down 0.9 percent to 2.3 trillion won during the cited period.

Shinhan Card, meanwhile, bucked the trend by pulling off a 0.5 percent expansion in the same period, with its loan balance estimated at 6.19 trillion won.

The figures are well below the guideline maximum of 5 percent growth put forward by the FSS.

The country’s financial regulators have recently ratcheted up pressure on credit card firms to limit their loan services as part of efforts to rein in household debt. But card firms pushed ahead with their expansion plans this year, boosting the number of credit cards issued in the first half of this year to 122.3 million, already surpassing the total issued last year.

Overall household debt surged to a record high of 876.3 trillion won in June, mostly made up of mortgages and credit card debt.

By Yang Sung-jin (insight@heraldcorp.com)