Only 'VIP' for Credit Cards...Hundreds of Thousands Won Annual Fee Cards, Benefits Are Being Reduced [Heotdari Economy]

(41) You Should Carefully Consider the Benefits That Match the High Annual Fees

Editor's NoteMany people thought they were engaging in smart economic activities to get better outcomes, but it often turned out to be a misstep. When consumers are deceived by corporate marketing or blinded by momentary gains and make wrong decisions, the ones who ultimately suffer are the consumers. We aim to examine economic activities where people have misjudged everyday situations and made mistakes.

As card companies focus on issuing premium cards, their revenue from annual fees has surged. However, despite the higher annual fees compared to regular credit cards, the benefits of premium cards are gradually being reduced, and many consumers feel dissatisfied because they do not receive benefits equivalent to the fees they pay.

The revenue from annual fees for card companies is on the rise as the issuance of premium cards increases. According to the Financial Supervisory Service on the 12th, the cumulative annual fee revenue for the first half of this year from eight domestic card companies (Shinhan, KB Kookmin, Samsung, Hyundai, Hana, Woori, Lotte, and BC Card) was 708.4 billion KRW. This is about a 10% increase compared to the same period last year (643.4 billion KRW) and about a 16% increase compared to 2022 (609.9 billion KRW). Hyundai Card recorded the highest annual fee revenue at 163.4 billion KRW, up about 20% from last year. It was followed by Samsung Card with 145.3 billion KRW, Shinhan Card with 124.1 billion KRW, and Kookmin Card with 93.6 billion KRW.

Although card companies’ annual fee revenue is increasing, the benefits of premium cards are shrinking. The Woori Card Two Chairs, known as the card used by IU and with an annual fee of 2.5 million KRW, was renewed in July this year, and its benefits were reduced. Previously, it offered an annual premium gift voucher equivalent to the annual fee amount, including ▲1 million Moa Points (points that can be used like cash) ▲1 million KRW worth of mobile department store gift certificates ▲500,000 KRW worth of premium hotel dining vouchers. After the change, it only provides ▲1.2 million Moa Points ▲1 million KRW worth of mobile department store gift certificates, totaling about 2.2 million KRW in premium gift vouchers.

Also, while the previous card allowed 2% accumulation at all domestic and international merchants without monthly spending conditions or accumulation limits, the renewed card introduced a monthly accumulation limit capped at 100 million KRW in spending. The annual reward benefits were also reduced. Previously, it provided a 1% accumulation benefit for annual spending over 100 million KRW, but now it only grants 500,000 points for spending over 100 million KRW at domestic and international merchants.

Hyundai Card, which focuses on premium cards, ended the service in January this year that offered on-site and billing discounts at Club Gourmet and fashion merchants for about 40 cards. For premium cards 'The Green' and 'The Pink,' which have an annual fee of 150,000 KRW, the basic accumulation rate was raised from 1% to 1.5%, but the benefits of 1.5 times accumulation for spending over 1 million KRW and double accumulation for spending over 2 million KRW were removed. Additionally, the benefit of earning 5% points at travel, gourmet, overseas, and department store merchants, which was available if monthly spending exceeded 500,000 KRW, now requires a monthly spending threshold of 1 million KRW.

Samsung Card ended its existing premium customer membership program 'Premium Rewards' at the end of last year and revamped it into a new membership program called 'THE VIP' starting this year. The new membership is selected from customers who have used Samsung Card for over five years and have met annual spending requirements. This raises the threshold for customers eligible for the service. The spending criteria range from 30 million KRW to 200 million KRW annually. The cashback marketing for one-time car purchases was also significantly reduced. The service that provided a 1.0% cashback rate ended in October last year and was lowered to 0.7% cashback.

The 'Marriott Bonvoy The Best Shinhan Card,' with an annual fee of 267,000 KRW, offers a '50,000 KRW discount on breakfast (buffet)' twice a year at about 20 Marriott-affiliated hotels in Korea. However, as major hotels have raised buffet prices and imposed strict restrictions on the use of discount coupons, consumer dissatisfaction is growing. Although the card offers free hotel stay vouchers through events in the first year of issuance, the same annual fee cardholders are excluded from such events the following year.

The belief among consumers that paying higher annual fees will yield more benefits, combined with card companies’ desire to secure annual fee revenue, has led to an increase in the average annual fee for credit cards in Korea. According to the credit card platform 'Card Gorilla,' the average annual fee for 44 major credit cards launched in the first half of this year was 113,225 KRW. This is a 63% increase compared to last year's average of 69,583 KRW. The average annual fee in the first half of this year rose 36% compared to the same period last year.

An industry insider said, "Overall, the trend is toward an increase in premium cards," adding, "As consumption patterns become more sophisticated, consumer needs have also increased, leading to this change." However, they advised, "Since benefits can frequently change depending on consumer spending patterns and card usage trends, it is necessary to carefully consider the required benefits before subscribing, especially since premium cards have higher annual fees than regular credit cards."