Consumers with disposal income below W500,000 banned from getting new cards

Financial consumers whose disposal income does not exceed 500,000 won ($450) will be ineligible to apply for a new credit card under new measures.

“Irrespective of consumers’ personal credit standing, credit card firms will be allowed to issue a new card to those with monthly disposal income ― or total earnings minus debt payment ― above 500,000 won,” the Financial Supervisory Service said in a statement on Sunday.

An FSS official said the action is designed to prevent issuers from recklessly doling out credit cards to consumers with low credit standings.

“Instead, we are considering vitalizing the usage of debit card-type products whose payment is based on their cash-holding on bank accounts, not on personal credit,” he said.

In particular, the usage of check cards ― which refer to cards containing functions of both credit and debit cards ― will be promoted.

The policy, aimed at easing the financial burden of debt-saddled low- and middle-income households, will be included in comprehensive measures to be unveiled by the financial regulator.

While check cards have the benefit of preventing holders from spending recklessly as the payment system is based on their bank balances, the nation saw check card use stay at less than 10 percent of the credit card use.

To promote the public’s check card usage, the FSS has been in talks with the National Tax Service to offer check cardholders more benefits in yearly income tax deduction.

The income tax deduction rate for check cardholders currently reaches 25 percent, while the rate for credit cardholders stands at 20 percent.

Financial authorities plan to raise the rate for check card usage above 25 percent.

In most advanced countries, check card use accounts for about 50 percent of total payment cards, including credit cards, according to regulatory officials.

Aside from the promotion for the public, officials said, it is required to instruct credit card companies to increase the issuance of check cards.

As a promotion measure, the FSS has already instructed credit card companies to lower payment service fees charged on retail stores for check card usage.

By Kim Yon-se (kys@heraldcorp.com)