Firms to slash check card incentivesThe glory days of check cards seem to be passing by as local credit card companies, one after another, scale down customer services of these prepaid cards, citing minimal profit from commission charges. Check cards, which were first introduced in 2000 in Korea, act like debit cards in that they draw cash from automated teller machines, but they can also be processed through the same terminals used for credit cards.
According to industry sources, credit card firms including Hyundai Card and BC Card have announced on their respective Web sites that they will be lowering the rate of accumulated cash back rewards that customers are able to earn when using check cards.
Already, this month alone, Hyundai Card has reduced around 20 services offered to its check card customers, and starting in April of next year, it will no longer offer customers a 0.5 percent cash back reward, 40 won per liter cash back services at GS Caltex, 5 percent cash back at Starbucks, or a 50-percent discount at theme parks.
Hyundai Card isn’t alone. The Industrial Bank of Korea and Woori Bank will also lower the cash back accumulated rate starting next year on BC and Nonghyup cards. Shinhan Card and Samsung Card will also lower the rates of their cash back points while tightening the standards of check card applications. The move made by credit card companies in scaling down their check card businesses come as they have been struggling over the low commission rates charged on these check cards. The cards hardly bring them profit. An option would be increasing the commission rates but this would spark strong opposition from owners of commercial stores and shops as has been the case recently with credit card transaction fees.
“Local card firms that have slightly lowered their card transaction fees recently are taking away services of check cards to fill in the loss and to remain profitable,” said Cho Nam-hee, chief of the Korea Finance Consumer Federation.
The transaction fee firms receive from stores for check cards is 1.9 percent, which is lower than those of credit cards that are in between 2.2 percent and 2.6 percent.
“Card companies are choosing the easy way of making up for the recently lowered credit card transaction fees by reducing consumer benefits rather than by making voluntary efforts,” said Lee Bo-woo, a business management professor at Dankook University.
There are industry criticisms that card firms limiting their check card services goes against government’s recent efforts to boost the usage of check cards. Since transaction fees for check cards are lower than credit cards, boosting the usage of check cards would prove to be one of the solutions to the credit card transaction fee controversy. Korea’s check card usage as of now, however, is very low - 10 percent of all card usage.
By Yoon Chang-hee, Lee Eun-joo [firstname.lastname@example.org]
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