In the third quarter of this year, installment payments of taxes, including national and local taxes, charged to personal credit cards reached 3.5273 trillion won, up 28.2% from a year earlier. With lump-sum payments rising just 0.8%, installments accounted for more than 90% of the increase in tax payments by card. The carried-over balance of payment-type revolving, in which part of a card bill is pushed to the next month, also topped 7 trillion won.
Data on usage at eight card-only issuers from the Credit Finance Association on the 27th show that installment payments under the "national and local taxes" category on personal credit cards in the third quarter rose by 776.8 billion won from 2.7505 trillion won in the third quarter last year. Lump-sum payments over the same period were 9.3721 trillion won. Installments' share of total tax payments by card was about 27.3%, up 4.5 percentage points from about 22.8% a year earlier. By month, tax installment payments of 764.6 billion won in August rose by 331.2 billion won in one month to 1.0958 trillion won in September.
Tax payments vary widely from month to month depending on due dates, but on a quarterly basis the increase in installments far exceeded that in lump-sum payments. This is interpreted as growing demand to pay unavoidable tax bills over several months instead of all at once.
The same pattern appeared in card bill repayments. According to the Credit Finance Association, the carried-over payment-type revolving balance at the end of September was 7.0521 trillion won, which is 327.6 billion won (4.9%) more than 6.7245 trillion won at the end of September last year and 176.2 billion won (2.6%) more than 6.8759 trillion won at the end of July. Revolving is a payment method in which only part of a billed card amount is repaid and the remainder is carried over to the following month or later.
Over the same two months, card loan and cash advance balances actually declined. The card loan balance fell by 455.3 billion won (1.1%) from 42.7957 trillion won at the end of July to 42.3404 trillion won at the end of September, and the cash advance balance fell by 407.9 billion won (5.8%) from 7.0251 trillion won to 6.6172 trillion won. Compared with a year earlier, balances rose in all three categories, but in the past two months only revolving moved in the opposite direction.
At all eight card-only issuers, the carried-over revolving balance at the end of September was higher than at the end of July. This means the balance of deferred repayments swelled across the industry, not as a temporary phenomenon at some card companies.
Some also see the financial authorities' overall household loan quota management as a factor in this trend. When the authorities lowered the household loan growth target to 1.5% in April, card issuers also began to curb lending. The August target was raised to 3%, but the industry says there is still little room to expand lending. With access to loans such as card loans blocked, part of the demand for funds may have shifted to payment-type revolving, which is excluded from the overall quota management.
Deferring payment reduces the cash leaving an account right away but can increase financing costs. Fees are charged on amounts carried over through revolving, and the fee rate can reach as high as about 19% a year. When the following month's card spending is added to the amount carried over, the sum to be repaid grows. Installment payment of taxes may also incur fees depending on the card issuer and terms of use.
A card industry official said, "As economic polarization deepens, a growing number of people use revolving instead of loans to raise funds, or choose installments over lump-sum payments even when paying taxes. Last year, the revolving balance temporarily declined because of policies such as the livelihood recovery consumption coupons, but recently households' financial strain appears to be reflected in how they pay by card."