SEOUL, March 8 (Korea Bizwire) — South Korean consumers are increasingly pulling out their debit cards to make purchases, thanks in part to the income tax deductions their use engenders and attractive loyalty programs, new data from the Bank of Korea (BOK) has revealed.
According to the report released by the BOK on Tuesday, spending on debit cards jumped 10 percent on-year last year, reaching 466 billion won (US$435.9 million).
From 312 billion won in 2014, debit card spending rose to 424 billion won in 2016 before hitting a record high in 2017, and experts base the newfound popularity on a variety of benefits given to debit card holders both from the government and credit card companies.
Individuals filing year-end tax returns can receive income tax credits for up to 30 percent of their spending, twice the rate for spending on credit cards.
Without having to pay an annual membership fee, debit card users still enjoy a wide range of benefits just like credit card holders, including discounts at cinema chains and theme parks, cash back rewards, and a mileage system, all of which contribute to the nation’s growing debit card spending.
When it comes to the number of cards issued, check cards accounted for nearly 21 percent last year, up 0.8 percent from the previous year.
As of last year, over 120 million check cards were issued, surpassing the figure for credit cards which stood at around 99 million.
While the number of newly issued check cards grow at a rate 1.8 percent higher than credit cards, South Koreans used credit cards more on a daily basis.
Though an increasing number of credit card and debit card transactions are being made, many are for payments at convenience stores, super markets and public transport, bringing the average transaction value down.
In the meantime, daily credit card spending hit a record-breaking 1.76 trillion won (US$1.65 billion), up 4.9 percent.
While personal credit card spending rose 10.2 percent, corporate credit card spending dropped 8.7 percent over the same period, following credit card companies’ decision to reduce commission fee discounts for companies paying national tax via corporate credit cards.
Hyunsu Yim (email@example.com)