Due to the convenience of the system and benefits, credit cards have long been a dominant means of payment in Korea, especially for large transactions. But it seems that their disadvantages are fast outweighing the advantages.
Park Eun-hee, a 31-year-old bank employee in Seoul who married in February this year, says that she found her credit card quite useless during her wedding preparations.
“The discount or cash-back benefits offered by most of the credit cards were not as great as the tax benefits for debit cards or cash,” Park said.
“Also, credit cards tend to encourage excessive or impulsive consumption, which is a risk factor when purchasing high-priced articles such as furniture or home appliances.”
She even scrapped one of her credit cards, deciding to replace it with a debit card.
Park’s skepticism of credit cards is largely in line with the recent downtrend of the industry. As of the end of February, the number of credit cards in use was around 99 million, which was the lowest since 2008. Card companies expect the number to fall further in the coming months.
In contrast, the number of debit cards issued last year totaled 107 million, exceeding that of credit cards for the first time, according to the Bank of Korea.
Such changing trends in the card industry had been detected since 2012 but have recently accelerated due to the massive personal information leak scandal that led to stringent countermeasures from the government, a move that some believe further turned people away from credit cards.
But financial authorities claim that the dwindling number of credit card holders should be recognized as the “bubble bursting” and that the overheated card industry is now taking steps toward “normalization,” rather than a decline or deterioration.
“The Korean market tends to be excessively reliant on credit payments, especially compared to the world’s (other) developed economies,” said an official of the Financial Services Commission.
It was amid such worries that the government revised its policies in 2011, tightening the qualifications for credit cards and alleviating those for debit cards. It also reduced the tax deduction rate for credit cards last year, in an effort to regulate the market.
By Bae Hyun-jung (firstname.lastname@example.org