SEOUL, KOREA: More people are defaulting on credit card payments as borrowers find it hard to repay debts amid rising consumer prices and an economic slowdown.

According to data by the Financial Supervisory Service, the average credit card default rate at 11 commercial banks rose to 1.45% in late June from 1.39% in March.

Credit card defaults at banks temporarily improved in the fourth quarter last year from 1.52% in September.

The ability of credit card users to repay their loans has been deteriorating since the start of the year.

Industry sources put the blame squarely on banks, as heated competition caused them to hand out credit cards too freely.

Banks have been trying to raise profits from their credit card business, which brings in higher returns than traditional deposits and loans.

Credit card companies are also writing off more bad debts.

Samsung Card, the nation's No 2 credit card firm, reported on Wednesday that its default rate rose to 1.8% as of late June from 1.6% in March. The default rate on credit purchases made within one month of card registration surged to 3% from 2.3% during the same period, according to the company.

Average credit card default at five card companies was 3.52% as of late March, according to FSS data.

Households' capacity to pay their debts has weakened as consumer prices hit a near 10-year high of 5.5% in June. Mortgage loan rates at banks have soared to 8% due to higher lending rates between banks.

Regulators and industry watchers have worried that excessive credit card purchases and borrowing could hurt households and erode the industry's financial soundness.

Local banks and card firms suffered harsh setbacks due to high credit defaults in 2002 and 2003, after reckless card issuances. (By KIM YOON-MI/ The Korea Herald/ ANN)