South Korean card loan rates drop to 13% despite rising funding costs

Average card loan rates for eight major South Korean credit card companies fell to 13.55% in September, down 0.55 percentage points from the previous month. This decline occurs despite an increase in funding costs, which rose from 4.42% to 4.61% during the same period.

The decrease is attributed to an expansion in mid-interest rate loans targeting low-to-medium credit borrowers, aligned with government inclusive finance initiatives. In the third quarter, the total volume of mid-interest rate loans from the eight major card companies reached 2.45 trillion won, a 14% increase compared to the same period last year.

Financial authorities have supported this trend by increasing incentives. Since August, the growth in mid-interest rate loans is 100% excluded from the total household debt limit for financial institutions, an increase from the previous 40% exception rate.