Check cards attract the thrifty, but beware traps

Frugal consumers like to use check cards because of the year-end income tax deduction benefits. At a time when consumers are trying to cut down on costs as much as possible, is there a way to be even more frugal?

The answer may lie in the check card business. Securities companies are offering various benefits for using check cards, including a points return rate of 3 to 5 percent with every card transaction. Considering the fixed deposit interest rate in the low-1 percent offered by banks, going into the card business might not be a bad gamble.

According to the financial investment industry, Kyobo, Dongbu, Shinhan, Yuanta, Eugene, Hyundai and SK are the seven securities companies issuing their own check cards.

Using check cards is advantageous if a customer already holds a cash management account (CMA) bankbook with the same securities company, or is using funds, equity-linked securities (ELS) and investment benefits.

The check cards’ high rate of return is attractive when compared to the benefits offered by banks and card companies. Customers can potentially receive two to three times the return on their payment accounts with their check cards, compared to what they would receive from their banks’ fixed deposit interest rates.

With Shinhan’s “CMA R+” check card, customers get a CMA interest rate of 3.1 percent when spending 500,000 won ($430) a month. The rate of return increases as expenditure rises, so when customers spend over 1 million won, they get a rate of 4.3 percent.

Should they use their credit cards and check cards together, they get the maximum 6.9 percent rate of return.

Many people are registering for check cards, with 500,000 cards being issued in the first half of June.

Yuanta is offering a 3 percent annual rate of return for customers spending between 100,000 and 300,000 won on their check cards. Considering the basic rate of return in the 1 percent range for CMA bankbooks, customers are getting a hefty annual interest of 4 percent.

When spending over 300,000 won, the annual rate of return jumps up all the way up to 5 percent. A stock investor can enjoy a rate of return between 0.5 and 1 percent when using the Yuanta Stock+ card, which is specially designed for use in stocks, subject to conditions.

Hyundai is not shying away from the competition and is offering a variety of benefits including the “able i max” check card, which gives users a rate of return from a balance equivalent to the card expenditure.

For example, by spending 500,000 won on a check card, customers are able to receive an additional return in the range of 0.5 to 1.2 percent of 500,000 won per month on their funds, ELS, pension savings or CMA bankbook.

For customers who have never used a securities company, using check cards may be a good idea.

The securities company check card business began in July 2013, and there are still many benefits on offer.

This month, SK released its “LUNCH” check card, which gives 10 percent return for any expenditures at restaurants, cafes and convenience stores between 11 a.m. and 2 p.m., with no annual fees.

Dongbu’s “Dongbu Cashback 3.1” check card not only gives a 0.6 percent return on expenditures, it offers 0.5 percent additional monthly cash back even after customers have registered for benefits with its insurance companies.

For securities companies, check cards offer an effective way of securing new customers. Check cards are proving to be useful for securities companies as they face competition from banks, which have larger customer bases and more opportunities to offer incentives.

“Our goal is to attract potential customers with investment benefits, not earn revenue from card commissions,” a securities company associate said.

Although card users don’t need to worry about commissions, there are some points worth noting. Having a large account balance does not mean customers enjoy high interest rates indefinitely. Most additional rates of return are provided when expenditures exceed approximately 5 million won.

Using cash can also be difficult when using check cards, since it is not known whether convenience stores and other ATMs exempt commissions.

BY SHIM SAE-ROM [ebusiness@joongang.co.kr]