South Korea will ease rules on debit cards and add to cardholders' conveniences, the country's top financial regulator said Tuesday, in an apparent move to tackle mounting household debts.
The Financial Services Commission (FSC) said it plans to raise the daily permissible purchase limit on debit cards to 6 million won (US$5,461) by the end of this year, compared to the current ceiling at around 3 million won.
The financial regulator will also allow consumers to use their plastics 24 hours a day, improving the current system in which all debit-card purchases are banned for 15 minutes after midnight for calculation.
Starting next year, cardholders will also receive refunds one day after making cancellation requests, significantly shortening the time from a one-week period in the current system.
The FSC will also have all banks establish partnerships with all card companies to provide local consumers with more leeway in choosing debit cards, further boosting the usage of such plastics.
The latest decision came as the government has been making efforts to curb the country's mounting household debts by imposing a stronger regulation on credit cards, while providing more incentives to debit card users.
Household debt has surfaced as a major drag on the local economy, crimping private consumption and hurting growth, as its rapid growth since early 2000 has expanded to take up 89.2 percent of the country's gross domestic product for 2011.
Seoul's move to encourage the use of debit cards appeared in its revised tax law, which said it will give a 30 percent tax exemption on spending by debit cards, while lowering the rate on credit cards to 10 percent from the current 15 percent.
Debit cards accounted for 15.4 percent of the combined card purchases made in the second quarter of 2013, rising sharply from 13.2 percent tallied at end-2011. The figure came to 5.7 percent at end-2007.
The FSC, meanwhile, will also urge South Korea financial firms to issue more debit cards by implementing a series of new policies, including reducing the commission rate which local banks charge on card companies.
The FSC said it expects the move will bolster local usage of debit cards to reach the level of advanced countries and provide the government with more tax revenue.
The United States and Germany saw the portion of debit cards out of total plastic purchases reach 44.7 percent and 98.1 percent, respectively, in 2010