Number of credit cards hit record high last year

The average number of credit cards held by Koreans hit a record high last year thanks to a well-established payment system and improving economic conditions, a report showed Sunday.

A total of 114.94 million cards had been issued by the end of the third quarter of last year, according to the report by the Credit Finance Association.

Given that the number of economically active people totaled 24.99 million at the time, the average number of cards held by employed individuals came to a record 4.59 million, the report showed. This compares with 0.6 million reported in 1990.

The report added that the ratio of credit card spending to total private consumption expenditure rose to a record high of 56.1 percent in the third quarter. Spending on credit came to 256 trillion won ($228.1 billion), the report showed.

A separate report predicted Korea’s credit card industry would continue expanding this year, but its growth is likely to cool on slowing economic growth and subdued consumer spending.

Hana Institute of Finance, a think tank of the country’s No. 4 financial holdings company Hana Financial Group Inc., said the local market for plastic money is forecast to reach 486 trillion won ($430 billion), up 8.5 percent from 2010. The outlook is lower than a growth estimate of 11.1 percent for last year.

According to the report, the country’s credit card market is expected to keep growing on rising purchases and cash loan services via plastic money.

A slowdown in economic growth, however, is forecast to weigh on consumer sentiment and possibly lead to higher delinquency rates.

Major think tanks and governmental organizations have forecast economic growth in 2011 to hover around the 4-5 percent range, down from the 5-6 percent level in 2010.

“The financial health of local credit card firms may weaken as delinquency rates rise on slowing economic growth,” the report said.

Rising expenses spurred by aggressive marketing among the country’s credit card firms are also expected to dent their profitability, the report added.

(From news reports)