Rich, but household debt is growing: A time bomb for South Korea?

South Korean households are piling up debt for various reasons, from overspending on credit cards to unemployment to gambling losses. The programme Undercover Asia looks at the causes — and the effects.

South Korean households are the most indebted in Asia, but they are still splashing out.

SEOUL: He was earning 620,000 won (S$710) a month, but Koo Young-gyu had four credit cards that gave him a combined monthly credit limit of 60 times that amount.

Flush with the extra liquidity, he went on an 18-month spending spree; he went on a trip to Jeju Island and splurged on things like shoes and a camcorder.

“I thought, ‘Let’s live this year in abundance,’” he said. “I felt uncomfortable when I spent like that. But it was hard to stop.”

He racked up nearly 87 million won of credit card debt in his late 20s and did not know how to get out of it. For almost a year, debt collectors harassed him.

“When my family found out about (my debts) in 2016, I thought I shouldn’t live any more because of the shame,” he said.

In despair, he attempted suicide three times — by cutting himself, overdosing on pills and poisoning himself with a potent mix of alcohol.

His failed suicide attempts are hardly the exception. Between 2014 and 2018, more than 800 people tried to kill themselves by jumping off the Mapo Bridge in Seoul.

Known as the “Bridge of Death”, it is one of the country’s most notorious suicide spots. The top reason for attempting suicide? Debt.

South Korea may be an economic powerhouse, with the fourth largest economy in Asia after China, Japan and India, but its households are up to their necks in debt.

The country has Asia’s highest household debt to GDP ratio, and it is driving people like Koo to desperate measures, the programme Undercover Asia finds out as it delves into the causes and the consequences.


This year, South Korean households owe banks and other financial institutions some 1,611 trillion won. This debt, said Anwita Basu, head of Asia country risk research at Fitch Solutions, has risen “at a much faster rate” compared with household income.

“(This) suggests that people are taking on more debt in order to repay their original debt,” she added.

Household debt refers to student loans, car loans, home mortgages, small business loans and credit card debt.

A key contributor to the country’s high household debt is the reliance on credit card spending, which accounts for some 40 per cent of the country’s GDP, compared with 18 per cent in the United States.

The 1997 Asian Financial Crisis played a part in this credit boom when the South Korean government kick-started the economy by encouraging consumers to spend, including by giving tax breaks for credit card payments.

Over the years, the number of companies issuing cards grew, and they also loosened credit limits to entice cardholders.

Koo recalled that when he lost his job owing to a medical condition, he lied to the credit card companies about it.

“You can manipulate the documents to show that you’ve got a job,” he said. “Because I used to work, I could leave it as it was. I could give them the same information from my previous job.”

According to credit card issuers, an increasing number of people were defaulting on their payments last year because of a tight job market, stagnant income growth and a rising cost of living.

Z24 News

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