South Korean credit card firms are expected to rake in huge profits this year from their loan services as more cardholders take out cash advances on their credit cards amid tightened lending regulations, industry sources said Tuesday.
Credit card companies posted a combined profit of 679 billion won ($592 million) from their loan business in the first half of the year, compared with a profit of 403 billion won a year earlier, and will likely see the figure top 1 trillion won this year, according to the sources.
Card firms’ profits from loan services totaled 679 billion won and 739 billion won, respectively, in 2009 and 2008.
The Financial Services Commission, the country’s financial regulator, said this year’s profit could not be directly compared with the previous years’ figures as it is calculated on new accounting standards and do not include the profit posted by KB Kookmin Card, which was spun off from the country’s top lender KB Kookmin Bank in March.
The regulator said the card firms’ business practices, including their loan service business, are closely monitored.
Cash advances on credit cards, easily accessible via automatic teller machines, carry a fee rate ranging from 7 to 28 percent.
Market watchers said credit card holders are resorting to cash advances as banks and other commercial lenders move to curb a rise in household debts in tandem with the financial regulator’s recent set of measures to tackle snowballing household debt, which hit a record 876.3 trillion won as of end-June.
Several banks temporarily halted the extension of fresh home loans in mid-August.
(Yonhap News)
