Card Loan Balance Falls for Second Month to 42.8 Trillion Won... Cash Advances Surpass 7 Trillion Won

The outstanding balance of card loans by domestic card companies decreased for two consecutive months, following a record high set in May. In contrast, other short-term loan balances such as card loan refinancing, cash advances, and payment-type revolving credit increased.

According to the Credit Finance Association on August 20, the outstanding balance of card loans by nine card issuers (Lotte, BC, Samsung, Shinhan, Woori, Hana, Hyundai, KB Kookmin, and NH Nonghyup Card) stood at 42.7957 trillion won at the end of July. This represents a decrease of 113.6 billion won compared to the previous month’s 42.9093 trillion won.

Card loan advertisements posted throughout downtown Seoul. Photo by Yonhap News Agency

Card loan balances hit an all-time high of 43.2534 trillion won at the end of May, before declining for two consecutive months in June and July. Industry analysts attribute the increase in May to heightened funding demand during Family Month and the so-called 'balloon effect' caused by household loan regulations in the banking sector.

The credit finance industry is required to keep the year-on-year growth rate of household loans, including card loans, under 1.5% in 2024. Financial authorities are regularly monitoring the household loan growth trend of each card issuer and urging them to comply with the target.

However, a reduction in the outstanding card loan balance does not necessarily mean that demand for funds among ordinary consumers has decreased. In fact, both card loan refinancing, which allows borrowers unable to repay card loans to switch to other loans, and short-term cash advances have actually increased.

The balance of card loan refinancing reached 1.648 trillion won as of the end of July, up 99.5 billion won from the previous month's 1.5485 trillion won. The outstanding balance of payment-type revolving credit also rose by 43.9 billion won to 6.8759 trillion won over the same period.

The increase in cash advances was even more pronounced. At the end of July, the balance stood at 7.0251 trillion won, up 240.9 billion won from the previous month's 6.7842 trillion won, surpassing the 7 trillion won mark.

This trend—where the card loan balance is declining while refinancing and cash advances are rising—is being interpreted as evidence that demand for short-term funds continues despite the financial authorities' quantitative restrictions that are curbing the supply of card loans.

This content was produced with the assistance of AI translation services.