Debit cards start to gain popularityThe popularity of debit cards is not as strong as what the government hopes, but users are expected to steadily rise, according to a recent survey by Visa.
The government believes offering more tax deductions and other incentives should persuade people to use debit cards instead of credit cards.
According to Visa’s Global Payments Tracker Survey for 2012, Korea ranked top for penetration of credit cards out of eight countries: India, Indonesia, Australia, Japan, Russia, South Africa and the United Arab Emirates. The survey showed 80 percent of Koreans have credit cards.
It ranked second in debit card distribution, with 78 percent.
A majority of Korean consumers said they use plastic for purchases because it’s more convenient than carrying cash, while 41 percent said they want to accrue mileage points.
On debit cards, 55 percent of those surveyed said they liked them because they can make large purchases easily, while 48 percent said they are good to control their spending.
But the average Korean consumer has 3.3 credit cards and only 2.2 debit cards, and 83 percent preferred credit cards.
Japanese consumers beat Koreans with an average of 2.5 debit cards each.
Yet the survey showed that Korean consumers are steadily shifting to debit cards as the benefits for credit cards are declining.
The government started offering tax breaks on credit card spending in 1999 to crack down on the black economy, or sales that are not reported to the tax agency.
But to curb household debt levels, the government decided last year to reduce tax benefits for credit card purchases while increasing them for debit card purchases.
Visa’s survey showed that the penetration of debit cards went up from 76 percent in 2011 to 78 percent last year, while credit card penetration lost 1 percentage point compared to a year earlier.
Card companies are also competing to offer debit card benefits. These include discounts on purchases at online shopping malls, department stores, restaurants and gas stations, and discounts on Toeic exam fees and textbook purchases.
KB Kookmin Card’s Workers Bonus Check Card gives discounts on insurance premiums, national taxes, local taxes and a 2 percent rebate on telecom charges, the company said.
It also gives a 60 won ($0.05) discount on weekends and 50 won discount on weekdays for every liter of gasoline bought from GS Caltex, and a 5 percent rebate on amounts spent at Lotte, Hyundai and Shinsegae department stores.
Shinhan Card’s Charm Shinhan provides a 60 won discount per liter of gasoline at SK gas stations, a 5 percent discount at drugstores and the Hyundai, Lotte and Shinsegae department stores, a 20 percent discount at a coffee house chain and a family restaurant chain, and a 50 percent discount at an amusement park.
Most card companies, including Shinhan, KB Kookmin, Samsung, Lotte, Hyundai, BC and Hana SK Card, decided last year to slash 50 percent of the optional services provided with credit cards in line with the government goal of encouraging shoppers to use debit cards.
By Kim Jung-yoon [firstname.lastname@example.org]