The total amount of loans offered to local credit card holders decreased in the first quarter compared to the last three months of 2010 as financial institutions and state regulators tightened oversight to prevent risks down the road, an industry report showed Thursday.
The latest findings showed card loans provided by six dedicated cards, excluding BC Card, reached 5.45 trillion won ($5.07 billion) in the cited period, down 7.8 percent from 5.91 trillion won tallied for the fourth quarter of 2010.
The drop came as Seoul has moved to better regulate rises in credit card firms’ risky loans, issued mostly to borrowers with low creditworthiness. Rising card loans and cash advances issued by credit card companies, which are in heated competition to outgrow each other, are cited by many policymakers as a major economic risk that can result in growth of household debts and loan delinquencies.
Higher interest rates as South Korea moves to curb inflationary pressure may have also contributed to less money being borrowed.
Shinhan and Lotte cards said compared to the fourth quarter, their card loans edged up just 0.4 percent and 1.5 percent, respectively, while the sizes of loans by Samsung, Hyundai, Hana SK and KB Kookmin credit cards all contracted in the January-March period from the last quarter of 2010.
“There has been a drop in the size of card loans that peaked at over 6.6 trillion won in the third quarter of last year,” a credit card business insider said. He, however, said that judging by the relatively stable loan delinquency rate, the amount of loans released should not pose an immediate financial burden on households or the economy.