Shoppers find joke’s on them as cards kill perks

Lee Su-ji signed up for five credit and debit cards after getting her office job two years ago. She now regrets her decision as she has to fork out annual membership fees despite still not having ever used some of them.

“I feel as though I wasted my money,” said the 27-year-old.

The rate of credit card issuance in Korea is among the highest in the world as consumers are tempted by a variety of incentives, such as free round-trip flights to Jeju and discounts on gasoline.

But as credit card companies are rolling back such benefits after the government ordered them to lower their transaction fees, the trend of people cherry picking among their cards and using different ones for different purchases to enjoy the maximum benefits may be drawing to a close.

Consumer groups are now advising people to stick with one credit card for 2013 as issuers are making it harder to enjoy incentives by raising the minimum spending threshold on each one.

They also say debit cards are shaping up as more attractive alternatives in many cases.

All-in strategy

According to Visa Card, its Korean customers hold 3.3 credit cards on average, the highest rate in the world.

However this may soon change as issuers are set to slash up to 60 percent of their benefits including discounts and credit card points that can be used as cash equivalents.

“People need to make sure the credit card they lean on the most is the best suited to their lifestyle,” said Choi Moon-seok, chief of public relations at Lotte Card.

He advises people to compare banks that run credit card units with independent credit card companies, and choose a card that matches their age, hobbies and lifestyles.

Cards issued by banks like Shinhan and KB Kookmin provide lower bank transaction fees and better interest rates on loans, while those by independent companies like Hyundai Card and Lotte Card often provide benefits linked to their non-financial affiliates.

In contrast, homemakers who agonize over their grocery bills would more likely go for cards that offer discounts at department stores, discount chains and online shopping malls, while male drivers in their 30s may benefit more from cards issued by companies with automaker affiliates.

“Even if credit card firms reduce their benefits, they cannot cut the services in which they specialize,” said an employee at one local credit card company.

Consumers should check their credit ratings before they switch over to a new card as the issuance requirements have been made tighter. To be eligible, subscribers must now be over 20, have a credit rating of six or lower, and have over 500,000 won ($472) in monthly disposable income.

Credit or debit?

For those torn between debit and credit cards, experts advise them to pick a card that reflects their spending patterns as credit card companies require them to spend a minimum amount each month to enjoy certain benefits.

The government has encouraged the use of debit cards to curb impulsive spending by raising tax breaks on them to 30 percent last year, up from 25 percent in 2011, while slashing tax breaks for credit cards from 20 percent to 15 percent.

“Debit cards are recommended for people who don’t spend a lot each month,” said Ko Seung-hoon, who runs Card Gorilla, a popular local portal that offers information on credit card use.

Mixing the two can also be profitable if a sensible strategy is adopted, others say.

“Use credit cards when buying high-priced goods like home appliances and cars, and use debit cards for things like coffee and meals,” said an employee at a credit card company.

Card users should also not forget to check their reward points before terminating rarely used cards as these can serve as cash equivalents.

According to the Credit Finance Association, credit card points worth 109.3 billion won expired in 2011 without being used. A similar amount was wasted in the previous year.

Sites like www.cardpoint.or.kr offer can prove extremely helpful in this respect as they provide information about how many points remain on credit cards. Customers can quickly access this information on their smartphones as the association runs a free app.

“It’s convenient to use accumulated points in exchange for free air miles and gift certificates,” Ko said.

By Hong Sang-ji [mijukim@joongang.co.kr]