Credit card perks pay off

Korean consumers prefer to use credit cards instead of paying for goods and services by cash or debit cards because of the economic benefits attached, ranging from discounts to points that serve as cash equivalents, the Korea Consumer Agency said yesterday.

According to a survey on 1,000 shoppers by the Korea Consumer Agency, 64 percent of respondents say they prefer paying for goods by credit card, followed by debit card (24.5 percent) and cash (11.5 percent).

Of those who answered, 42.1 percent said discounts, points and interest-free installment payments are the major economic benefits offered by credit card companies.

And 8.5 percent of respondents cited attractive tax returns, while 2.7 percent said credit card usage improves their credit ratings.

Many credit cards give discounts on movie tickets, amusement park admission tickets and cashback services, and this has been a driving force behind their popularity.

But the agency said people’s reliance on such cards is likely to change in the future as they are growing less satisfied with the services offered. Credit card firms are currently scaling back their services to make up for losses incurred after they were forced to slash the transaction fees they levy on small- and medium-sized retailers.

KB Kookmin Card abolished its cashback service for the popular Good Day Card last month. It also cut the maximum discount for public transportation to 30,000 won ($28) from 50,000 won per month.

Another example that has stoked customers’ ire is Hana SK Card’s decision to change the terms of its discounts on gas, movie tickets and restaurants for users who spend 300,000 won on the card in a three-month period.

From February, only those who spend this amount in a single month will be eligible for the savings.

Just over 91 percent of the survey respondents said they would be willing to pay by cash or debit card if they could get discounts on par with those offered by credit card issuers.

Over 70 percent of respondents called on the government to amend a law which bans such discounts.

Samsung Fire and Marine Insurance and other non-life insurers tried to skirt the ban by giving discounts to subscribers who pay by cash or bank transfer before the government stepped in.

“Non-life insurers pay a combined 250 billion won in transaction fees to credit card companies annually,” said an employee at a non-life insurer. “We want to give discounts to subscribers who pay by cash or bank transfer, but that’s not allowed under current legal measures.”

The agency said the use of cash and debit cards would surge rapidly if the law were to be amended.

By Kim Mi-ju [mijukim@joongang.co.kr]