South Korea Credit Card Loans Soar by 26% in March

Cash-strapped South Koreans pushed their credit card loans to a 25.6 percent on-year increase in March amid a prolonged lockdown.

Seven credit card firms -- Shinhan, KB Kookmin, Woori, Hana, Samsung, Hyundai, and Lotte -- extended new loans that reached 4.3 trillion won ($3.5 billion).

Annual increases in January and February were at 1.6 and 16.6, respectively.

The surge was attributed to the COVID-19 outbreak, with small business owners and those with poor credit increasingly using their credit cards.

Small business owners and those with poor credit turned to credit card companies since they do not implement a strict credit screening process like banks.

However, industry observers noted that the stock bargain-hunting frenzy also contributed to the surge in credit card loans, with many investors taking advantage of stocks that have become cheaper.

"Credit card loans seem to have surged right after the recent stock market crash, suggesting part of March borrowings were for stock purchases," said a credit card company official.

South Koreans also turned to commercial banks for loans.

The amount of unsecured loans extended by five major Korean banks, including Kookmin, surged by close to 2.2 trillion won in March from February, which is the biggest monthly jump since January 2016.

The internet-only Kakao Bank also extended increased amounts of unsecured loans, that reached 13.9 trillion won in March, up by 945 billion won from the 368.9 billion loans extended in February. The bank lent 115.3 billion won in January

The coronavirus outbreak had forced Asia's fourth-largest economy to implement measures that have curtailed the country's economic activity.

It's been three months since South Korea reported its first confirmed coronavirus case on Jan. 20.