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[Weekender] How DDP emerged as an icon of Seoul
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Credit cards issued by foreign banks are expected to lose many benefits they used to offer customers, industry sources and banks said this week.
Standard Chartered Korea and Citibank, two of the top foreign banks in Korea, said they would be reducing credit card benefits by up to 50 percent starting next year.
The reduced benefits will be mostly in the form of exempting fewer customers from membership fees and offering fewer discounts or card points.
The move comes on the heels of the local credit card sector’s decision to adopt similar business strategies in response to recent government measures for slashing the fees it collects from its corporate members.
Credit card companies have consequently come under public backlash for shortchanging their consumers to cover their losses.
“The problem is that we are seeing these firms trying to compensate for their loss not by improving their business strategies, but by slashing the customer benefits,” said Cho Nam-hee, head of Financial Consumer Agency, a consumer rights organization here.
Those in the foreign banking industry, however, said they were only acting according to government guidelines calling for the banks to slash the benefits to stay aligned with the policies for local credit card companies, which are being forced to cut advantages for so-called VIP clients to close the gap with regular customers.
The foreign banking sector also said there’s time to consider their actions since the reduced benefits won’t go into effect until the latter half of next year.
Industry sources said while both the foreign and local card sector are to blame, the backlash against the foreign sector appeared fiercer as it was just months ago that local financial authorities stepped in to shave the high interest that banks were collecting from cash advances.
In October, eight out of 10 consumers were discovered to be paying an annual interest of up to 30 percent for cash advances from credit cards issued by foreign banks.
Credit Finance Association figures showed that Standard Chartered was charging nearly 80 percent of those who use the cash services with an interest rate as high as 30 percent. Citibank also charged almost 80 percent of its users with similarly high interest.
In contrast, only half the customers who used cash advances from credit cards issued by local companies were paying annual interest rates of 24 percent or higher.
By Kim Ji-hyun (jemmie@heraldcorp.com)
Standard Chartered Korea and Citibank, two of the top foreign banks in Korea, said they would be reducing credit card benefits by up to 50 percent starting next year.
The reduced benefits will be mostly in the form of exempting fewer customers from membership fees and offering fewer discounts or card points.
The move comes on the heels of the local credit card sector’s decision to adopt similar business strategies in response to recent government measures for slashing the fees it collects from its corporate members.
Credit card companies have consequently come under public backlash for shortchanging their consumers to cover their losses.
“The problem is that we are seeing these firms trying to compensate for their loss not by improving their business strategies, but by slashing the customer benefits,” said Cho Nam-hee, head of Financial Consumer Agency, a consumer rights organization here.
Those in the foreign banking industry, however, said they were only acting according to government guidelines calling for the banks to slash the benefits to stay aligned with the policies for local credit card companies, which are being forced to cut advantages for so-called VIP clients to close the gap with regular customers.
The foreign banking sector also said there’s time to consider their actions since the reduced benefits won’t go into effect until the latter half of next year.
Industry sources said while both the foreign and local card sector are to blame, the backlash against the foreign sector appeared fiercer as it was just months ago that local financial authorities stepped in to shave the high interest that banks were collecting from cash advances.
In October, eight out of 10 consumers were discovered to be paying an annual interest of up to 30 percent for cash advances from credit cards issued by foreign banks.
Credit Finance Association figures showed that Standard Chartered was charging nearly 80 percent of those who use the cash services with an interest rate as high as 30 percent. Citibank also charged almost 80 percent of its users with similarly high interest.
In contrast, only half the customers who used cash advances from credit cards issued by local companies were paying annual interest rates of 24 percent or higher.
By Kim Ji-hyun (jemmie@heraldcorp.com)
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Articles by Korea Herald
