By Kim Tae-jong
Credit card firms are facing growing complaints from consumers as they have reduced their benefit programs by making requirement stricter. The move is seen as an attempt to offset losses incurred by a fall in transaction fee income.
According to the credit card industry, many major card issuers have already cut customer benefits such as discounts, cash-back programs and reward points by up to 50 percent during the first half of the year from 12 months ago.
They now expect to see drops in profit by 20 to 30 percent this year due to the reduction of transaction fees, which have led them to cut down or limit customer benefits associated with reward credit cards.
“The financial authorities are strictly regulating credit card loan services, and the reduction of transaction fees will also lead us to suffer from falling profits,” an official from a card firm said. “That’s why we are now making some adjustments to customer benefits.”
The Financial Services Commission (FSC) will next month announce a new system for credit card transaction fees, which is expected to lower the average rate to 1.5 percent from the current 2.09 percent by leveling varying charges.
It comes as part of the Lee Myung-bak administration’s efforts to help support small- and medium-sized businesses as well as customers for “shared growth” but to minimize the impact of this on profits, credit card firms have reduced customer benefits.
First, most card firms have raised the minimum amount charged to plastic, the key requirement for customers to receive benefits in reward programs.
Most customers have received discounts at designated outlets if putting over 200,000 won on a card the previous month, but this has increased to between 300,000 and 500,000 won.
Firms plan to notify their customers of the new requirements for reward programs.
Samsung Card will increase the minimum amount charged over the last three months for discounts at amusement parks and on movie tickets to an averaged 300,000 won from the current 200,000.
Shinhan Card customers should spend at least over 300,000 won from Oct. 2 to receive discounts on oil and it will also reduce the discount on movie tickets from 2,000 to 1,500 won.
Lotte Card will change the terms and conditions for its DC100 credit card from next year. It currently offers up to 10 percent off for purchases at Lotte Mart when customers buy goods worth over 500,000 won. But customers will have to pay over 1 million won with their credit card to see the same benefits in 2013.
Hyundai Card will limit some customer benefits from November, including free use of Wi-Fi overseas and roaming services in China and Japan.
Those holding a KB Kookmin Card can save about 0.1 percent of purchases as reward points but this will be stopped from October.
But these moves have drawn criticism.
“Card companies’ move to cut existing customer benefits will only draw backlash from customers,” an official from the Korea Finance Consumer Federation said. “They need to come up with other solutions to tackle difficulties arising from reduced transaction fees.”