The Number of Delinquent Credit Card Exceeds One Million

The number of delinquent credit cards, held by people who failed to pay their credit card bills, exceeded 1 million.

The Financial Supervisory Service (FSS) announced yesterday that, among the 47.54 million credit cards, the delinquent credit card holders have 1.04 million cards (2.2 percent), as of the end of November 2001. The number has increased 67 percent from last July, when 625,000 out of 36.84 million credit cards were possessed by credit card defaulters.

The FSS added that the actual number of delinquent credit card users who ruined their credit due to credit card use would be estimated 500,000-600,000 because many credit card defaulters have more than 2 credit cards. Therefore, it is possible to calculate that, as of the end of November 2001, 17-22 percent of the 2.794 million delinquent credit record holders who have registered at the Korea Federation of Banks have ruined their credit due to credit card use.

The FSS pointed out that the major reason for the rapid increase of the number of defaulted credit cards was the competition among credit card companies, which newly issued over 10 million credit cards between July to November 2001.

According to the FSS, the number of teenage credit card holders increased 66 percent, between July to November 2001, from 193,000 to 324,000, which is much higher than the 29 percent growth of total credit card holders during the same period.

Therefore, the number of teenage credit card defaulters has increased 7,456 from 6,194.

The FSS said that the increase of credit card defaulters was due to the credit card companies` reckless issuance of credit cards to people who have poor credit history, including teenagers, in order to gain customers.

An official of the Credit Supervision Department of the FSS said, "The volume of individual bankrupts who are connected to credit card default, out of the total individual bankrupts, has increased from 40 percent in 2000 to 70 percent in 2001. The credit card defaulters are the latent bankrupts."

While the number of credit card defaulters increasing, the proportion of the defaulted debts in the credit card companies` working capital has decreased.

A high ranking official of the FSS said, "The increase of bad credit in relation to credit card default is only the increase of the volume of the bad credit as a result of the rapid growth of the number of credit card holders and of credit card loan. Thus it will not develop into a bankruptcy of credit card companies or banks."

Seung-Ryun Kim srkim@donga.com