Will South Koreans Shop Until The Economy Drops?
South Korea’s economy is at risk due to high household debt. Though the government is highly concerned, there are no signs of consumers letting go of their precious plastic…
One of the busiest places in Seoul, Myeong-dong is among Korea’s prime shopping destinations. Reuters Reporter U-Jean Jung gets inside details on Korean residents’ personal spending habits and views on credit cards.
Make-up artist Jeon Seung-Hoon took hold of his outrageous spending behavior by tearing up his credit card.
Jeon says, “My card was always maxed out. I like fashion, so I kept on buying clothes.”
Another resident, Bang Eun-Som, has a similar story to Jeon.
Bang says, “I’ve maxed out my card before, and I also spent twice as much as I earned. It was unimaginable.”
Some other residents like Park Ga-Yeon like to keep a couple of cards on reserve.
Park says, “I have four credit cards, but I only use one or two.”
Four credit cards may sound a bit extreme, but that’s not the half of it. In fact, the average South Korean has up to five credit cards. This trumps anywhere else in the world. South Korea officially holds the world’s highest level of household debt.
Soft Landing Consulting Director Tom Coyner points out that high consumer spending mirrors the country’s uber-competitive nature. He uses his knowledge to help foreign companies profit in South Korea.
Tom says, “It’s not so much to be ahead of the pack, but more the anxiety of not being at least in the middle of the peer group. So there is a conscientious need to show that one is being successful and keeping up with the Kims.”
Reuters Report U-Jean Jung concludes, “If you look at all these people spending away on the streets, you’d think South Korean credit card companies would be doing pretty well. Well, they used to. According to Fitch Ratings their profitability has fallen by more than half. The government is increasingly concerned about rising household debt, which has led to more restrictions stopping people from getting access to easy credit.”
Due to grave concerns, the government is doing its best to influence consumers from amassing such high credit card debt. They’ve implemented tax incentives to lessen the amount of money people borrow.
They are also pressuring credit card companies to make lending more difficult. Though this massive debt puts the
South Korean economy in no immediate danger, if coupled with a rise in interest rates, the economy fall flat on its face down the road.