Hello readers! How many times a week do you receive phone calls from credit card companies promoting sales? I receive such calls at least once a week, and it really bothers me. Responding to this issue, ‘Model Criteria for Credit Card Issuance and Limitation on Credit Line’ were set by the Financial Services Commission (FSC) and Credit Finance Association along with credit card companies. Hopefully, through this strengthened measure regulating credit cards, we will be less bothered by annoying phone calls!
First of all, stricter rules will be applied for credit card issuance. Under the previous Specialized Credit Financial Business Act, credit cards could be issued to individuals over eighteen year olds. This means that even the under-aged were eligible to hold their own credit cards, as long as meeting other criteria with a consent from legal representative and submission of an income certificate.
However, according to the amendment under the Act, credit cards will be only issued to individuals over twenty year olds who are legally classified as an adult. Exceptions to this requirement do apply when government entities need such exceptions for a policy matter. The other case for the exception is when an individual over eighteen years old can prove his or her employment status. As well as this amendment, there is a newly introduced regulation under the Act. That is, an individual’s credit rating should be between one to six to apply for a credit card.
The new measures indicate detailed regulations with regard to low-credit individuals. First, Credit card companies will receive individuals’ credit rating information from a number credit rating companies, when evaluating credit card applications. If there are differences in ratings from each rating company, the most favorable condition will be applied. Second, an credit card appliant’s disposable income should be more than KRW 500 thousand per month. However, this is a very minimum requirement. Accordingly, despite meeting the income requirement, an individual may be granted a debit based credit card if the income level is considered not sufficient enough. Needless to say, credit cards will not be issued when it is difficult to prove one’s payment capabilities. Also, individuals with overdue debts at financial institutions or credit card loans from more than three credit cards will not be able to apply for a new credit card.
By enhancing the current regulations for credit card, FSC expects the level of household debt to be lowered as well as the use of debit cards to be encouraged. For the other parts of new measures, please keep your eyes on the next post, ‘Model Criteria for Credit Card Issuance and Limitation on Credit Line'(2) .