Credit card spending expected to exceed W700tr this year

Korea’s credit card spending is expected to post a record high of 700 trillion won ($632 billion) this year, data showed Sunday.

Despite the expected spending increase, card issuers are likely to eke out a meager profit due to a sharp decline in the number of individual card holders, according to data released by KB Financial Group.

Credit card spending in South Korea has continued to rise since it topped the 600 trillion won mark in 2011, when the government encouraged credit card use to reduce tax evasion from unaccounted cash transactions.

The spending figure was 659 trillion won in 2012, 680 trillion in 2013 and is expected to stand at 690 trillion won in 2014, data showed.

By categories, company credit cards and debit cards accounted for about 19 percent (133 trillion won) and 14 percent, respectively.

Analysts pointed out, however, that card companies were likely to suffer one of their most difficult years due to the falling growth of individual card spending.

Growth in individual credit card use has steadily dropped since it recorded a 14 percent jump in 2008. Last year and this year’s growth are estimated at 0.8 percent and 0.5 percent, respectively.

Debit cards, widely known as check cards in Korea, are also expected to see a marginal growth of 4 percent this year, due to the government’s reduction of income tax deduction benefits.

“Overall, the payment card market has entered a stage of maturity. It’s difficult to see a rapid growth of card use like in the past,” said Jung Hoon, a researcher at KB’s management research center.

“Users of cash advance loans, which had accounted for about half of the total card spending until 2003, have now shifted to card loans or private lenders,” Jung explained.

By Suk Gee-hyun (monicasuk@heraldcorp.com)