South Korea’s Credit Card Refinancing Loans Surge Amid High Interest Rates

Amid prolonged high interest rates, the balance of refinancing credit card loans in South Korea surged 22.7% to 1.6953 trillion won as of the end of August, up from 1.3817 trillion won at the close of last year. This sharp increase highlights mounting debt-servicing pressures among vulnerable borrowers relying on new loans to repay aging obligations.

The Bottom Line

• Refinancing Spikes: Refinance loan balances grew by over 300 billion won this year, reaching 1.6953 trillion won by the end of August.

Refinancing Balances Reach 1.7 Trillion Won as Borrowers Juggle Debt

The financial strain on consumer borrowers has intensified as prolonged economic sluggishness collides with higher borrowing costs. According to industry data tracked at the close of August, the total refinancing loan balance climbed to 1.6953 trillion won. The key number: that represents a 22.7% jump compared to the 1.3817 recorded last year.

This total even surpasses the 1.6467 trillion won registered at the end of 2024, a period marked by severe economic contraction following emergency martial law declarations. Concurrently, payment-type revolving balances—where cardholders pay only a fraction of their monthly statement and roll over the rest—grew 4.2% to hit 6.9994 trillion won last month.

A card industry official addressed the mechanics behind the shift: “The growth in refinancing loans and revolving balances indicates that vulnerable borrowers are facing financial strain and heightened repayment pressures.” While issuing refinancing loans provides short-term relief to card companies by masking immediate delinquency metrics, it embeds long-term structural risks into consumer balance sheets.

Funding Costs Climb for Major Card Issuers

The macroeconomic environment continues to squeeze both borrowers and financial institutions. Recent market interest rate hikes have expanded individual debt burdens while concurrently driving up operational funding costs for credit providers.

The funding rates for eight major card companies—including Shinhan Card, Samsung Card (KRX: 029780), Hyundai Card, and KB Kookmin Card—reached 4.42% in August. But the balance sheet tells a different story about the velocity of these increases: that figure marks a sharp 1.61 percentage point rise from the 2.81% recorded during the same period a year prior.

In its Financial Stability Report, the Bank of Korea issued a pointed warning regarding upcoming maturities. As corporate and card bonds issued at mid-3% interest rates reach maturity, new issuance rates have rapidly accelerated to the mid-4% range.

Financial Metric	Previous Period	Current Period (August)	Percentage Change
Refinancing Loan Balance	1.3817 Trillion Won (YE)	1.6953 Trillion Won	+22.7%
Revolving Balances	6.7201 Trillion Won (YE)	6.9994 Trillion Won	+4.2%
Card Industry Funding Rates	2.81% (Prior Year)	4.42%	+161 bps

Regulatory Assessment and Systemic Stability

Despite the aggressive expansion in household revolving debt and refinancing volume, financial authorities maintain that systemic stability remains intact. Regulators are closely monitoring asset quality, though current thresholds do not trigger immediate macroprudential interventions.

Disclaimer: The information provided in this article is for educational and informational purposes only and does not constitute financial advice.