3-Year Card Bond Yield Rises 0.8 P.P., Potentially Increasing Card Loan Interest Burden

The interest rate on 3-year maturity bonds issued by credit card companies to raise funds has risen by 0.804 percentage points compared to last year. The average funding cost for card companies, which rely on issuing bonds due to lacking deposit-taking functions, rose to 3.975% in March this year, up 0.516 percentage points from 3.459% in December last year.

An increase in card bond yields leads to higher funding costs for card companies, suggesting that interest rates on card loans (credit card loans) could also rise. Pressure on card bond yields continues due to Middle East risks and the weakening possibility of interest rate cuts by the US and South Korea. Consequently, card loan rates may also increase with a time lag in the latter half of the year.

A rise in delinquency rates also acts as a burden factor for increasing card loan rates. As of the first quarter, card companies' delinquency rates for over one month have risen to between 0.85% and 1.81%, an increase of 0.06 to 0.27 percentage points from the previous quarter.

Although financial authorities' loan regulations are prompting card companies to minimize marketing and lower adjusted rates, it is pointed out that card bond yields and adjusted rates alone are insufficient to offset the pressure of rising interest rates. Card companies are diversifying their funding structures by exploring various methods, such as increasing the proportion of short-term bonds with maturities of three years or less and securing foreign currency financing.