No More Card Loans

Suffering from rise of delinquencies and exacerbating profitability, credit card companies are making drastic cut on would-be-delinquent card loans.

Several companies plan to take strong measures such as depriving hundreds of thousands delinquent card holders of charging on their cards.

On November 25, according to credit card companies, card loans they advanced in this month, late October as of now, have reduced significantly in comparison with those of the last month,

Sum of card loans the Kookmin Credit Card has advanced by late October was 4,121 billion, which has curtailed 122.4 billion won from that of late September.

During the same period, the Woori Credit Card cut down the sum from 503.6 to 472.8 billion won, and Shinhan Credit Card reduced it from 503.8 to 489.1 billion won, cutting down 14.7 billion won as well.

New loans the Foreign Exchange Card advanced in October stopped at 77.6 billion won, which is half of the loans it advanced in September (158.2 billion won)

The reason why the card loans are being reduced drastically is that loan qualification standards are being hardened as the companies` profitability was worsened due to delinquencies of household loans.

The Kookmin Credit Card ceased card loans to its customers who have lowest two credit ranks among 10.

The Foreign Exchange Card heightened its minimum age to advance card loans for man from 25 to 30 and for women, from 20 to 25, five years respectively and reduced the loan limit from one to five million won according to individuals` credit ranks. In particular, it suspended loans to cardholders who charged significant cash advances from other cards.

The Hyundai Card used to allow its members who passed three months after joining to advance card loans unless significant problems are found. It, however, stepped up the qualification term to six months.

An official of the Kookmin Credit Card said, “Card Companies is required to lower their supplementary service (cash advance, card loan) ratio to below 50%,” and “we have no other option but to cut down cash advances and card loans.”

Parts of the companies are allowing for powerful measures such as selecting delinquent cardholders and banning them from using cards completely.

The Kookmin Card plans to settle credit purchase limit of its about four hundred and thousand cardholders who got registered as credit delinquents with more than 60 days overdue debts to `0 won`, which is virtually deprivation of their membership.

The LG Card, as well, is actively considering matching cash advance limits to individuals` credit ranks, and drastic curtailing or banning of its about three hundred and thousand delinquent cardholders from charging on their cards.

The Foreign Exchange Card has not lowered credit purchase limit so far. But it decided to lower cash advance limit of its delinquent cardholders up to 90%.

Chi-Young Shin higgledy@donga.com