Domestic credit card companies have seen a decline in bad debt expenses after four consecutive years of increases. However, the balance of long-term delinquent loans, those overdue for more than six months, has risen by 30% compared to the same period last year, raising concerns about future management of non-performing loans.
According to data from the Financial Supervisory Service's financial statistics information system, the total bad debt expense for seven major credit card companies—Shinhan, Samsung, KB Kookmin, Hyundai, Woori, Hana, and Lotte—was 2.3095 trillion won in the first half of this year, a decrease of 5% (122.6 billion won) from the same period last year.
Bad debt expense reflects losses recognized in accounting when the likelihood of recovering loans, such as credit loans or card payment amounts, decreases. The annual bad debt expense for these seven companies surged from 23.734 trillion won in 2021 to 28.385 trillion won in 2022, reaching 43.597 trillion won in 2023. This upward trend continued with expenses of 46.061 trillion won in 2024 and 46.144 trillion won in 2025, maintaining a high level.
While this year marks a shift to a decreasing trend, the potential for increased loss burdens remains. The amount of long-term delinquent loans continues to grow. As of the end of June this year, the balance of loans overdue for more than one month was 21.857 trillion won, down 271.4 billion won (11.0%) from the first half of last year, while the balance of loans overdue for more than six months rose from 3.427 trillion won to 4.454 trillion won, a 30% increase during the same period.
Industry experts are concerned about the potential deterioration of financial stability in the second half of the year. Rising benchmark interest rates have led to increased credit loan rates, which could heighten repayment burdens for borrowers with lower credit ratings. According to the Korea Credit Finance Association, the average interest rate for credit loans among the seven major credit card companies rose from 13.72% annually in January to 14.48% in August, an increase of 0.76 percentage points.
The Bank of Korea also pointed out the potential for asset quality deterioration due to the increase in card loans in its financial stability report last month. The balance of card loans, including credit loans, cash services, and revolving loans, grew from 44.9 trillion won at the end of last year to 46 trillion won by the end of June this year. Notably, more than half of the increase was attributed to borrowers in the bottom 20% of credit scores.
Kim Yong-jin, a professor at Sogang University, stated, "While credit card companies are managing risks through post-delinquency management and strengthening credit assessments, the issue remains that the repayment capacity of lower-credit borrowers is still weak. If high interest rates persist, household defaults could increase, negatively impacting the management of credit card companies."
* This article has been translated by AI.
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