Credit Cards Account for 54% of Spending
By Yoon Ja-young
Staff Reporter
Credit cards accounted for over half of total private spending in the first half of this year.
According to the Financial Supervisory Service and the Credit Finance Association, credit card settlement, excluding cash advance service and corporate credit card spending, totaled 137.6 trillion won in the first half of this year, taking 53.8 percent of total private spending.
The use of plastic took only 5.6 percent of total private consumption in 1990, steadily rising to 24.9 percent in 2000. It jumped to 45.7 percent in 2002 as the government encouraged people to use credit cards.
Use of plastic dropped to 41.6 percent in 2004, with the economy suffering from the collapse of the credit card bubble. Payment using cards has rebounded since then as the government is giving tax reductions on credit card spending as it can thus track transactions and collect tax from small businesses.
The regulator estimated the ratio to exceed 50 percent for the first time this year, as the figure recorded 53.8 percent in the first half of the year. Credit cards accounted for 49.5 percent of total private spending last year.
The surge of credit card spending might be considered ironic when considering the slowdown of the economy. The association explained that people are choosing to pay with credit cards to get tax reductions and benefits from various discount programs offered by credit card companies as a marketing strategy.
A large portion of the increasing use of plastic is for small sum payments. Statistics from BC Card showed that the number of credit card payments worth 10,000 won or smaller totaled 131.6 million in the first half of this year, up 46.3 percent from a year ago.
Use of plastic in learning institutions such as hagwon also surged 67 percent, with the number of payments totaling 21.5 million. Private institutes had previously been reluctant to receive credit cards, preferring to use cash in an attempt to lessen tax expenditure.