Cut in card commission results in fewer perks for customers
South Korea’s credit card firms in mid-October reluctantly announced they would lower the transaction fees they collect from restaurants and other shops due to growing public criticism.
Now, credit card companies are fighting back by eliminating benefits for customers, a move that was widely expected but stings nonetheless.
Credit card companies as well as card units of banks are taking steps to trim extra services for their customers in a bid to minimize the expected revenue decrease resulting from the commission cut.
At the height of the credit card bubble, companies promoted free entry to major entertainment parks, sharply discounted movie tickets and other benefits that helped sign on many customers.
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A Hyundai Card Co. credit card is displayed for a photograph at the company’s headquarters in Seoul. (Bloomberg) |
Now, such benefits are rapidly being phased out, and even the remaining ones are reserved only for those who spend a set amount of money by using the credit cards on a monthly basis.
BC Card and Hana SK Card, starting from this month, no longer offers air mileage credits to those who opt for interest-free installment payments for their credit card purchases.
Other companies are taking similar steps, generating complaints from customers.
KEB Credit Service announced it would apply new restrictions and conditions from June next year. Its Yes OK Saver Card, for instance, will allow for a 4.5 percent gas mileage on the condition that card holders spend at least 200,000 won per month. Currently, there’s no such condition. Other KEB cards are being changed to push customers to spend more to get benefits.
Lotte Card also said it would halt the free entry to Lotte World for its card customers, a change that wipes out one of the key benefits that lures customers. Although the plan will take effect in May next year, a growing number of customers are already expressing their disappointment on Internet communities.
For credit card companies, however, the options are dwindling as not only small restaurants but other businesses ranging from bookstores to bars are demanding a cut in transaction commission.
Korea’s credit card firms recently pledged to cut the commission rate to below 1.8 percent for small businesses in a response to the mounting pressure from the regulators and the government. They have been applying favorable transaction fees to large retail chains while charging smaller shops regular fees.
By Yang Sung-jin (
insight@heraldcorp.com)
