Credit card spending dips for first time

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Credit card spending dips for first time

For the first time, credit card spending saw a year-on-year decline, largely the result of the government’s reduced tax benefits for their use to stem the problem of increasing household debt.

According to the Credit Finance Association yesterday, credit card spending in September fell 1.7 percent compared to the same month last year. That is a stark contrast to check card spending, which rose 15.6 percent year-on-year in September.

“We believe credit card spending has fallen largely because of the government’s reduction of the year-end tax return from credit cards as well as the Sept. 4 financial regulators’ plan to encourage the use of check cards,” said an official at the association. “Additionally, we believe this trend will likely get worse once more people join in making their purchases with cash to avoid being tracked by tax authorities.”

Yet credit card swipes by amount still outstripped check cards. While overall card spending amounted to 46.3 trillion won ($43.7 billion), credit card purchases accounted for more than 80 percent at 37.8 trillion won. Check card purchases totaled 8.3 trillion won.

The government has been concerned about the continuous expansion of household debt. Including purchases made on credit, total household debt in the second quarter is estimated to be at 980 trillion won, 5 percent larger than the same period last year.

Although the central bank continues a loose monetary policy, tightening of the key borrowing rate could increase the burden on debt payments.

BY LEE HO-JEONG [ojlee82@joongang.co.kr]

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