S. Korea’s credit card loans soar in March amid COVID-19 fallout

SEOUL — South Korea’s credit card loans soared 25.6 percent on-year in March, amid the prolonged economic fallout of the COVID-19 outbreak, industry data showed Wednesday.

Seven major credit card service providers — Shinhan, KB Kookmin, Woori, Hana, Samsung, Hyundai and Lotte — extended 4.3 trillion won ($3.47 billion) in new loans last month, up 882.5 billion won from a year earlier.

The corresponding figures for January and February were up 1.6 percent and 16.6 percent, respectively. The country confirmed its first case of COVID-19 infection on Jan. 20, and saw the epidemic curve spike in late February.

The visible rise in card loans was seen as indicating the financial distress of small business operators and those with low credit rating who found it difficult to access bank loans.

“Accounting for a large part of the credit card loan borrowers were cash-strapped business operators who were either denied bank loans or could not afford to put up with all the required paperwork and wait,” said an official.

Local banks were also pressed by the snowballing volume of loans. The nation’s top five commercial lenders — Shinhan, KB Kookmin, Woori, KEB Hana and NH NongHyup — saw their combined credit loan balance soar 2.2 trillion won on-month in March, marking the steepest rise in four years.

Kakao Bank, the country’s leading internet-only bank, posted 13.9 trillion won in unsecured loans in March, up 945 billion won from the previous month.

Some market observers noted that the increased volume of credit card loans was partly attributed to investors’ buying binge amid a plummeting market.

”Drastic surges in card loans were often observed after a stock market crash,” an official said.

“Credit card loans involve a relatively simple approval process and lack prepayment penalties, so borrowers may secure quick cash and pay back whenever they earn revenues from investment.”