[Giha-Young's Life Card] Corporate Card Benefits Limited to Within 0.5% Starting July

Corporate Card Economic Benefit Limited to 0.5%
7 Major Card Companies Suspend Sales of 60 Corporate Card Types This Month

Is there anyone these days without at least one credit card? In modern society, anyone can have a card if they want. Credit cards have brought unparalleled convenience to daily life. Now, wherever you go, you can easily see people paying with credit cards or smartphones. As demand has increased, cards with various benefits are being released almost daily. In response, Asia Economy delivers diverse stories related to cards?ranging from introductions of new cards, industry behind-the-scenes, to guides for card beginners?through its weekly 'Cards in Daily Life' section, covering topics inseparable from our consumer lifestyle.

Starting this month, the benefits that card companies can provide to corporate members such as large corporations are limited to within 0.5% of the card usage amount. This is a measure under the revised Credit Specialized Financial Business Supervision Regulations. It aims to prevent credit card companies from engaging in loss-leading marketing to attract corporate members.

The main content of this revision is to limit the economic benefits to within 0.5% of the corporate member’s card usage amount, within the range where the total revenue from the corporate member’s card usage exceeds the total cost.

Revenue includes the annual fees plus merchant fees (approximately 1.8% on average) from corporate member usage. Costs include expenses related to recruiting corporate members, card issuance and usage, and benefits provided to the company. Economic benefits include additional services, fund contributions, cashback, and so on.

Until now, card companies have provided excessive economic benefits to attract large corporate members, and there have been criticisms that such cost increases lead to a burden on merchant fees. In fact, to attract corporate card member companies with large payments, card companies have paid internal welfare funds to client companies or covered overseas travel expenses for employees. According to the Financial Services Commission, as of the end of 2018, the annual fees paid by corporate members to card companies amounted to 14.8 billion KRW, whereas the economic benefits provided by card companies to corporations totaled 416.6 billion KRW, about 30 times more.

However, in this revision, small businesses and national/local governments are only subject to the criterion that total revenue exceeds total cost. This decision considers the small scale of small businesses and the fact that national/local governments’ funds are managed through the national treasury. For small businesses, the average annual sales are 12 billion KRW or less for manufacturing and 1 billion KRW or less for restaurants and similar businesses.

With the enforcement of this revision, starting this month, card companies have stopped issuing corporate cards that provided excessive benefits or have reduced additional services. Most of these are mileage cards or premium products. For new issuance to corporate members excluding individual business owners and small businesses, about 60 types of corporate cards have been discontinued by the seven major card companies (Shinhan, Samsung, KB Kookmin, Hyundai, Lotte, Woori, Hana Card). While new issuance to new members is not allowed, renewals and reissuances are still possible.

Since card companies have notified customers in advance about the adjustment of corporate card benefits, sudden benefit reductions are unlikely. However, as the economic benefits that can be provided to corporate members are limited to within 0.5%, it is expected that the number of corporate cards with reduced benefits or discontinued issuance will continue to increase.

This content was produced with the assistance of AI translation services.