Credit card companies dive into property payment marketYoon Han-a, a 39-year-old housewife, used to pay the monthly maintenance fee on her apartment in Sindang-dong, central Seoul, by automatic bank transfer.
But starting last month, she switched to making the 300,000 won ($255) payment using her Samsung Card. It lets her earn points she can use to make purchases and get discounts, and she even got 10,000 won off that first maintenance fee, thanks to a promotional event.
“I’ve been paying my communications and other public utility bills through my credit card but had to pay the apartment maintenance bill at the bank, which has been quite inconvenient,” Yoo said. “It seems like other housewives are applying for the [apartment maintenance bill] credit card payment service, too.”
Credit card companies are rushing to increase the number of subscribers who make property-related payments through their credit cards, a service recently revived after three years.
Credit card companies stopped the service in 2013 after a conflict over commission charges.
Unlike the past, however, some companies are now even letting customers pay rent with a credit card.
Card companies have revived the services in part because their profits have been shrinking after being forced to lower the commission fees that they charge stores.
Hana Card was the first to re-offer the service when it started accepting subscribers since the beginning of this month. Other credit card companies, including Shinhan, Samsung, KB Kookmin, Hyundai, Woori and Lotte Card, joined soon after.
As the competition has heated up, the companies have started offering discounts and promotional events.
This includes the 10,000 won discount on apartment maintenance fees in the first month offered by Samsung Card and others, as well as exemptions on commission charges between 500 won and 700 won every month.
Some credit card issuers are offering additional maintenance fee discounts of 5,000 won for a second and even third month.
The discount is a strategy to prevent subscribers from switching to other credit card companies. Shinhan and Lotte Card, whose events had already ended, recently extended their promotions.
According to the Korea Housing Institute, apartment maintenance fees totaled 12 trillion won in 2010. Before the service ended in 2013, roughly two million households paid their bills via credit card, amounting to roughly 3 trillion won annually.
“The card used to pay apartment bills regularly has the possibility of becoming the main credit card that the customer uses,” a Samsung Card official said. “It is an attractive business for credit card issuers.”
The service is also beneficial to customers because the size of property-related payments are usually huge, making it easy to fulfill the requirements needed to get various rewards.
Credit card companies are also jumping into the monthly rent payment market, which has typically involved bank transfers.
Shinhan Card is starting a trial service with Korea Housing Management, an affiliate of the Korea Land and Housing Corporation. Beginning this month, the credit card company started accepting applicants from roughly 5,000 households at rental apartments leased by Korea Housing Management.
KB Kookmin Card is planning to launch a rent payment service in the second half of the year, while Woori Card is preparing a similar service.
According to the Korea Appraisal Board, the average monthly rent is 558,000 won. This is more than twice the average monthly apartment maintenance costs for a 105-square-meter (1,130-square-foot) apartment at 219,030 won.
As of April, monthly rental contracts accounted for 44.6 percent of all apartment rental contracts in Korea.
As the credit card market is already saturated and companies are finding it difficult to attract new subscribers, rent payments are considered a new opportunity for credit card issuers.
The big question, however, is how many landlords will be willing to accept rent payments via credit cards.
Not only will landlords receive a smaller payment because of commission charges, but they will also have their earnings made from apartment rentals exposed on bank statements.
Credit card companies promoting the service say landlords can benefit from not having to worry about overdue payments.
“The biggest concern of the landlord is whether the right amount of rent will come in at a given payment date,” a KB Kookmin Card official said. “When payment is made from a credit card, the risk of overdue rent payments will be gone.”
BY HAN AE-RAN [email@example.com]
More in Finance
CU gets into the foreign exchange transaction business
Kospi hits another record high despite Covid spike
5-day winning streak ends as Kospi drops 0.62 percent
Debt is the latest hot product being pushed into the market
China's WeChat Pay and Seoul's Zero Pay now interoperable