Card companies draw back holiday promotions

Korean consumers might hit a snag in their shopping before the Lunar New Year’s holiday (Feb. 10). Some local credit card companies are cutting their special discount programs on certain products from department stores and large discount store chains.

Local consumers were recently given a break as credit card companies temporarily resumed offering interest-free installment-based credit card payments at stores last Thursday.

But now consumers are facing a scenario of no sales promotions related to credit cards.

Discount programs that offer price deductions on some products if paying through certain credit cards are likely to disappear. Card companies were offering gifts after consumers purchased certain items from a certain store, and that program is also likely to vanish under the current trend.

Large retailers, in association with card companies, have been offering special discounts on certain items before the holidays, hoping to bring in more customers. Previously, credit card companies covered most of the discounted amounts, but the revised Specialized Credit Financial Business Act, which went into effect this year, requires retailers to split the cost with them.

However, many retailers have refused to split the cost of promotions, pushing the fate of the special discount program in jeopardy. This is likely to add pressure to consumers who are battling the economic slump and high household debts.

Industry insiders said there is still a possibility that both card companies and large retailers could reach an agreement on promotion costs since the upcoming holidays are a big cash-earning period for them.

According to large chain stores, their sales have already been hit hard when interest-free installment-based credit card payments were stopped, but the stoppage of special discounts will bring much more damage, following consumers growing discontent.

Some card companies are already moving to keep their promotions with retailers. Lotte Card said that it has reached an agreement with some online shopping malls and home shopping retailers to split the special promotion costs and the related events will be on schedule following Lunar New Year.

By Joo Kyung-don [kjoo@joongang.co.kr]