Monday, May 18, 2009

NYT on Korea's credit card madness

[above: "Do you come with the card?" 
(This is actually a Simpsons reference)]

The New York Times has a newsish human interest story on how the sudden growth of credit cards — once seen as a way to jump start the economy — have become an albatross around the neck of many South Korean consumers and the economy as a whole. 

Among other things, the article discusses how their widespread use has eroded Korean savings rates, which had been at 25% but have dropped to less than 3%. It also makes some comparisons with the American crisis:
“The excess was similar to what’s happening with the American housing market today,” recalled Song Ji-hoon, a Rolex-wearing lawyer in his mid-30s who worked on behalf of one of the credit card companies. “Koreans wanted fancy cars, bigger TVs — although there was no real money to buy them — much the way those Americans thought that they could own houses with nothing but loans. Of course, in both instances, banks got greedy extending credits and mortgages to people who couldn’t pay back.”
I've had two credit cards in Korea: one from the Kookmin Bank (KB) which I've been using since I graduated from college in the 1990s, and the other from Shinhan Bank, which literally threw in the credit card as a bonus when I bought my apartment and got a mortgage with them. The Kookmin Card also contained the smart chip I needed to ride the subway and the bus, plus it gave me triple miles every time I bought gas at an SK station. The Shinhan Card, by the way, gives me loads of miles on Asiana Airlines. 

[above: Wouldn't it be great if your credit card grew in proportion to your debt? How cool would that be!]

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