'Pay it off later' — but revolving credit fees can be brutal

Revolving credit balances — deferred card payment arrangements — have risen for three consecutive months, swelling to 6.7 trillion won ($4.52 billion). Because revolving services make it difficult for consumers to gauge their total repayment burden and accumulated interest costs, the actual financial strain during a period of rising interest rates could prove far greater than borrowers expect, critics warn. Lawmakers are expected to revive legislative discussions in the second half of this year to address what critics call the "blackout revolving" problem.

According to the Credit Finance Association, the combined revolving balance at South Korea's eight dedicated card issuers — Shinhan, Samsung, Hyundai, KB Kookmin, Lotte, Hana, Woori and BC Card — reached 6.73 trillion won last month. After falling to 6.57 trillion won in March, the balance climbed for three straight months, adding more than 150 billion won in that span. The figure is close to this year's peak of 6.73 trillion won recorded in February. Analysts attribute the rebound to a shift in borrowing demand: after financial regulators tightened household lending guidelines in April, card companies scaled back card loan operations, pushing borrowers toward revolving credit and other products.

Revolving credit is typically used by cardholders who struggle to pay their full balance and need to avoid an immediate delinquency. While the service eases the pressure of a lump-sum payment, annual fee rates average between 16.09 and 18.4 percent, allowing debt to snowball quickly. For low-credit borrowers, rates can exceed the mid-19 percent range — Hyundai Card charges 19.66 percent — and the average revolving rate applied to customers with credit scores of 700 or below climbed to 19.0 percent last month.

Concerns are also growing that the interest burden gap between prime and subprime borrowers is widening. Card companies have lowered revolving rates for high-credit customers while holding steady or raising them for mid- and low-credit borrowers. The average revolving rate for customers with scores above 900 edged down from 15.10 percent at the end of March to 15.06 percent at the end of June, and the 801–900 band also edged down from 16.90 to 16.84 percent. By contrast, the average rate for borrowers with scores of 700 or below rose from 18.8 to 19.0 percent over the same period.

Critics argue that card companies need to overhaul their revolving disclosure practices, particularly as benchmark interest rates rise. Interest compounds repeatedly on the deferred balance, yet consumers receive no figures for their total repayment amount or cumulative interest costs at the time they sign up. In effect, revolving is a high-interest loan arrangement, yet card companies market it as a convenient payment feature. Their apps use phrases such as "pay only a portion" or "split your card bill into whatever ratio you like."

The case for reform has grown more urgent as young adults in particular have come to rely heavily on revolving credit. According to the Korea Inclusive Finance Agency's 2025 Youth Finance Survey, the 256,906 young people using revolving credit carried an average monthly balance of 3.26 million won. About 20 percent of them had revolving balances of 5 million won or more — far exceeding the average monthly card spending of 1.88 million won among young adults.

Legislative discussions on strengthening revolving disclosure requirements are expected to resume in the second half of this year, aimed at protecting vulnerable borrowers from mounting interest costs as rates rise. In April, People Power Party lawmaker Na Kyung-won introduced a bill to amend the Specialized Credit Finance Business Act that would require consumers to be clearly informed of their total repayment amount and cumulative interest costs before entering into a revolving agreement.

Financial Services Commission Vice Chairman Kwon Dae-young, speaking at a plenary session of the National Assembly's Legislation and Judiciary Committee in April, said he agreed that revolving credit poses structural problems and pledged to "review all relevant matters so that young people can fully understand the risks of revolving credit before using it."