CASH ADVANCE RATES REMAIN UNCHANGED

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Loans from credit-card cash advance services have reached the highest figure in 4 years since 2019. Despite having to pay a whopping 19% in annual interest rate for the service, people are turning to this option to make ends meet. We look into why interest rates on cash advance services remain unchanged despite the relatively stabilized financial market.

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This man in his 50s, the primary income earner in his household, uses a credit card cash advance service. Despite the high annual fee of 12 percent, which is on par with loan interest rates, he has no other choice but to utilize the cash advance service, due to his irregular income as a private tutor.

[Soundbite] Ahn ○○(Private tutor) : "I can’t pay off my loans and other expenses relying only on my income."

The cash advance service is convenient because it requires no screening from financial authorities and allows the withdrawal of cash within one's credit card use limit. However, the withdrawn amount must be repaid within a month, and the interest rate surpasses 19 percent, almost as high as the legal maximum interest rate. Nonetheless, the number of cash advance users continue to grow because credit card loans have become difficult to receive since they were included in the debt service ratio last year. Plus, credit card companies have slashed their loan services due to rising financing rates.

[Soundbite] Prof. Seo Ji-yong(Sangmyung Univ.) : "Cash advance services could result in insolvent debts because of the rising interest rates and short maturity."

However, interest rates on cash advance services remain unchanged. They remain high even though credit card companies' financing costs have decreased following the stabilization of bond rates.

[Soundbite] (Credit card company staff) : "It takes some time before consumers can feel a drop in loan rates, because the rates are reflected in financial products later."

Interest rates on cash advance will likely remain burdensome for the general public for quite some time, as interest rates are unlikely to go down if credit card companies begin managing loans to prevent insolvencies, which could also get worse because of the economic recession.