By Kang Seung-woo
Foreign banks’ credit-card subsidiaries charge a higher percentage of interest rates for cash advance services to their clients than domestic card firms.
According to the Credit Finance Association of Korea (CFAK) Monday, a majority of credit-card users pay an average of more than 20 percent in interest for a cash advance, but the proportion of those who pay interest of 20 percent or more surpassed 80 percent of credit-cards issued by Citibank, Standard Charted (SC) First Bank and Korea Exchange Bank (KEB).
94.9 percent of Citibank credit-card users pay 20 percent or higher, while SC and KEB mark 87.4 percent and 84.2 percent, respectively.
Those numbers are well above the average of around 25 percent of cards issued by Korean firms that pay similar interest rates.
For Shinhan, the total ratio of users who are charged with interest at 20 percent or higher accounted for 64 percent, with 31.7 percent charged between 10 percent and 20 percent.
At the same time, the portion for cardholders who pay 20 percent or higher interest payments among card-specialized firms range from 50 percent to 70 percent, as Lotte has 75 percent, followed by Samsung at 69.3 percent, Hana SK at 65 percent and Hyundai at 58.8 percent.
The card issuers that are affiliated with KB and the Industrial Bank of Korea (IBK) records 52.7 percent and 60.7 percent, respectively.
“The cash-advance service users are usually those who need cash urgently,” Hwang Seok-kyu, a senior analyst at Kyobo Securities, told The Korea Times.
Provincial lenders are worse than foreign banks, as more than 90 percent of provincial service users pay more than 20 percent in interest.
Jeonbuk Bank posted the highest rate with 97.47 percent, followed by Jeju Bank, Busan Bank, Kyongnam Bank and Kwangju Bank, ranging from 91.4 percent to 97.47 percent.
Daegu is the only provincial player to remain below the line, sitting at 79 percent.
“Provincial banks have strong networks and higher competitiveness in their regions, so they carry higher charges,” Koo Kyung-hwe, a senior analyst at Hyundai Securities, told The Korea Times.
“In addition, stronger customer loyalty from local residents makes them insensitive to interest.”
Experts say that customers need to check the interest charged for a cash-advance service through the system set up by the CFAK in April.
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yistory@koreatimes.co.kr
