Korean credit card companies’ assets have grown to alarming levels due to their proliferating competition, industry data showed Wednesday, raising the specter of a bubble.
The total assets of credit card firms stood at 79.3 trillion won ($70.4 billion) as of the end of 2011, surpassing the 78.9 trillion won tallied in 2003, a year after the country’s economy was hard-hit by a credit card bubble, according to the data.
Their assets dropped as low as 65 trillion won in 2008, but soon rebounded by nearly 15 trillion won in four years.
Outstanding credit card loans reached a total of 28.2 trillion won last year, up 300 billion won from a year earlier.
The mounting credit card loans came as local banks capped their loan ceilings from last July, in line with the financial regulator’s move to curb snowballing household debt.
Consumers turned to alternative means of borrowing, such as card loans, which are easy to access since the procedure for loan qualification is relatively loose.
The surge in card firms’ assets has sparked concern over a rise in defaults. The delinquency ratio at the card firms averaged 1.8 percent in the January-October period last year, twice the default rate for all household loans.
Experts said fiercer competition among credit card firms is blamed for the asset surge, which the country’s financial regulator should keep tabs on to prevent another credit card bubble.
Koreans spent a total of 558.1 trillion won on credit cards last year, up 40.7 trillion won from a year earlier, according to the data.
(Yonhap News)
