[EDITORIALS]Caution on credit cards

Kookmin Bank, Korea's biggest commercial lender, is playing hardball with its cardholders who have taken cash advances from three or more card firms. The bank has ended or significantly reduced business with these highly-indebted customers. Chohung and Hana banks have taken similar measures. If the trend spreads to the entire credit-card industry, the impact would be enormous.

Financial institutions should be encouraged to prevent bad loans from surging by culling potential scofflaws. In fact, local credit card issuers have reported 860,000 delinquencies this year, compared with 580,000 for all of last year. Card payments in arrears have exceeded 10 percent of all accounts.

Credit-card companies recklessly signed up new customers without properly checking their income. The side effect of this overheated marketing war is still being felt. The delinquency rate has been soaring, and some cardholders, unable to repay debts, have committed crimes or killed themselves. Banks also joined the competition to woo customers, not simply standing by and watching. That is why customers criticize banks for passing their burdens on to cardholders.

As financial authorities tried to curb household indebtedness, banks took advantage of the policy, raising lending rates and cutting interest rates on deposits. Leading this initiative was Kookmin Bank, which touts itself as a top institution.

Kookmin's latest move raises more problems on assessing creditworthiness. Kookmin labeled cardholders with cash advances from three or more card firms as potential delinquents. There is concern that many of them may get unfair treatment despite their ability to service their debts. More worrisome is that other banks may follow suit. If so, that could result in a surge in delinquencies since many cardholders take cash advances on one card to pay another.

Tougher credit-card rules mean a major shift in banks' policies. Banks should give consumers time to prepare for the change and make more thorough credit checks. Banks should not pass the burden of bad loans entirely to customers.