![Advertisements for card loans are posted in an alley in Myeong-dong, Seoul. [Yonhap]](https://wimg.heraldcorp.com/news/cms/2026/07/05/news-p.v1.20260705.3f1d65378a7e4e7a92dd546766d6b194_P1.jpg)
An unusual interest rate reversal has emerged in South Korea's card loan market. Even as funding costs rise, rates applied to low-credit borrowers have fallen while those for high-credit borrowers have climbed. Analysts say the divergence reflects a shift in card companies' lending strategies driven by the government's inclusive finance policy and household loan volume regulations.
According to the Credit Finance Association, the average card loan interest rate across eight dedicated card issuers — Lotte, BC, Samsung Card, Shinhan, Woori, Hana, Hyundai Card and KB Kookmin — edged down to 13.54 percent per annum in May, from 13.57 percent the previous month.
The breakdown by credit score tells a starkly different story. The average rate for borrowers with scores of 700 or below fell 0.09 percentage points, from 17.18 percent to 17.09 percent annually. By contrast, the rate for high-credit borrowers with scores above 900 rose 0.47 percentage points, from 10.52 percent to 10.99 percent.
The decoupling was even more pronounced at some individual issuers. At Samsung Card, the average rate for borrowers scoring above 900 jumped 2.0 percentage points, from 12.86 percent to 14.86 percent annually, while the rate for those scoring 700 or below edged down from 17.54 percent to 17.49 percent. Similar trends appeared at Lotte Card, Hyundai Card and BC Card.
Card loan rates typically move in tandem with issuers' funding costs. Recently, however, rates for low-credit borrowers have fallen even as those funding costs have risen.
According to the Korea Financial Investment Association's bond information center, the benchmark rate for financial bonds — unsecured, AA+-rated, three-year instruments averaged across five rating agencies — rose consistently from around 3.3 percent in January to above 4.2 percent by the end of May. Because card companies have no deposit-taking function and raise most of their funds by issuing such bonds, rising funding costs typically feed through to card loan rates with a lag of three to four months.
The decline in rates for low-credit borrowers is attributed to financial authorities' push to expand support for mid- and low-credit customers. Card companies have been increasing their supply of mid-rate loans in line with the government's inclusive finance policy. "We are consistently expanding our mid-rate lending in line with the government's inclusive finance policy," a Lotte Card official said.
Household loan volume regulations have also played a role. To encourage mid-rate lending, financial authorities allow up to 80 percent of mid-rate loan volume to be excluded from the calculation of a company's household loan growth cap. With the card industry required to keep household loan growth within 1.5 percent this year, issuers have little choice but to focus on expanding loans to mid- and low-credit borrowers, where the regulatory burden is comparatively lighter.
Record-high card loan balances have also prompted a strategic rethink. Financial authorities have recently ordered card companies showing notable household loan growth to tighten proactive management, and issuers are now reporting loan trends on a daily, weekly and monthly basis.
"Loans to mid- and low-credit borrowers come with policy support and regulatory incentives, whereas aggressively growing card loans to high-credit customers could increase the burden of managing overall volume," an industry official said. "The recent mood has been to scale back marketing to high-credit borrowers somewhat and expand the supply of mid-rate loans."
The trend is expected to continue in the second half of the year. A private-sector mid-rate lifestyle stabilization loan product, which debuted in the savings bank sector, is set to be introduced to the card industry this month, and Saitdol — a policy-backed loan product with credit guarantees targeting mid-credit borrowers — is scheduled to become available through specialized credit finance companies from October.
attom@heraldcorp.com
