Koreans Waste W148.3 Bil. on Int’l Credit Cards
Park, a 42-year-old office worker, has five credit cards. Of the W35 million that he charged to his cards last year, just W1 million was for overseas transactions (US$1=W916). Yet all of Park’s cards are from Visa or Mastercard and allow both domestic and overseas spending. Few consumers are aware that they have to pay more for such cards. In fact, when a consumer uses such an international card in Korea, he pays a royalty of 0.03 of his payment to the card company, and when he uses it abroad he pays more than 0.1 percent.Domestic card issuers pay these royalties to the foreign card companies, but the burden is passed on to the cardholders in the form of annual membership fees. For this reason, membership fees for international credit cards are more than W10,000, up to five times higher than the fee for credit cards that only work in Korea. In Park’s case, he is wasting more than W20,000 in unnecessary membership fees every year since all five of his cards allow overseas transactions.
Most card issuers don’t bother telling their customers that domestic cards are available, but push international cards instead. Kim, a 40-year-old employee, said, “I requested for a credit card that doesn’t allow overseas transactions, but the card company issued me an international card without even explaining why.”
According to an employee of a card company, issuers try to sell as many international cards as possible because foreign card companies offer them marketing support based on the volume of cards they sell.
According to Financial Supervisory Service statistics submitted to lawmaker Kim Young-joo (United New Democratic Party), only one out of 10 international credit cards issued in Korea is used overseas. However, 83.2 percent of credit cards currently being used in Korea are international and come from either Visa, Mastercard, American Express, Diners Club or JCB. Just 16.8 percent are for domestic use only.
That means an estimated W148.3 billion in unnecessary royalties left the country from Jan. 2004 to May 2007, or around W50 billion every year. “The wasted credit card royalties is worth as much as 278,000 exported Hyundai cars,” Kim said.
