By Yoon Ja-young
Seoul office worker Kim Seong-chan does not carry a wallet anymore because he pays for everything with a credit card.
For example, he often buys yogurt, which costs 1,100 won, at a convenience store on his way to work, and pays with a card.
According to KB Financial Group Research Institute, more people are using credit card, even for small amounts.
Individuals’ aggregate credit card spending at coffee shops is estimated at 3.7 trillion won this year, 5.5 times more than five years ago.
“It is true that coffee consumption itself has increased,” said researcher Jung Hoon. “But it is more attributable to the wide use of credit cards, even for small payments. People are using more credit cards at coffee shops.”
He also pointed out that more people were using credit cards at places where they usually had paid cash, such as billiard halls, locksmiths and public saunas.
Credit card spending at Chinese restaurants and fast food cafeterias is expected to reach 2.7 trillion won this year, up 143.2 percent from five years ago.
“Among the options of eating out, Chinese restaurants and fast food cafeterias are relatively cheap and you often eat alone there,” Jung said. “Credit cards seem to have substituted for small-sum cash payments here.”
Credit Finance Association statistics show that the average credit card payment stood at 45,700 won in the third quarter of this year, down from 59,000 won of the first quarter of 2012.
The ratio of small-sum payments, less than 10,000 won, with credit cards made up 41.6 percent of credit card spending. In 2000, small-sum payments made up only 4 percent of the total.
However paying small amounts with credit cards is not welcome news for credit card companies. Each time a credit card is used, it incurs a fixed cost for the card company. Usually, 10,000 won is regarded as a break-even point ― a small-sum payment, or less than 10,000 won, with a credit card means a loss.
“Total credit card spending increased 73 percent during the past five years, but due to diverse discount services and payments to the VAN (value added network) companies, credit card companies are suffering losses,” Jung said.
According to the Bank of Korea, local credit card companies made 1.8 trillion won net profit last year, down from 2.7 trillion won in 2010.