Banks to slash card spending exclusions that blocked loan rate discounts

Starting in the second half of this year, the card spending criteria banks use to determine loan rate discounts will be overhauled. The number of spending categories excluded from eligibility — currently as many as eight per bank, covering items such as cash advances, government subsidies, annual fees and merchant fees — will be cut to roughly one, limited to card loans and similar products. Debit cards will also be recognized on equal footing with credit cards.

Banks will disclose card rate-discount conditions in detail through loan agreements, websites and mobile apps, and will send regular reminders via mobile message and email for long-term loans.

The Financial Supervisory Service announced Wednesday that it is restructuring the loan rate-discount framework tied to card spending, in cooperation with the banking sector.

Banks currently offer rate discounts on household loans when customers meet conditions such as having their salary deposited, opening a savings account or hitting card spending targets. The FSS said it moved to reform the system after complaints mounted over how card spending is calculated and what purchases are excluded.

The primary purpose of requiring card use as a rate-discount condition is to deepen the customer's banking relationship with a primary bank. With that in mind, the number of excluded spending categories — currently four to eight per bank — will be reduced to roughly one, covering card loans and deferred transit card charges.

According to materials submitted by individual banks, KB Kookmin, NH NongHyup, IBK Industrial, SC, iM, Busan, Gyeongnam, Jeonbuk, Gwangju and Jeju banks will exclude only card loans, while Suhyup Bank will exclude only deferred transit card charges. Shinhan, Hana Bank and Woori Bank will eliminate all exclusions.

Each bank will also recognize both credit and debit card spending equally toward the rate-discount threshold, applying the same discount level regardless of card type. For installment purchases, spending will be credited across each month of the installment period, extending the window over which customers can accumulate qualifying card use and making it easier to meet the threshold.

In addition, because card spending calculation methods and exclusion categories vary by bank, and because complaints have been common from borrowers who were not adequately informed at the time of signing, banks will strengthen consumer disclosures.

Banks will provide detailed guidance on how card spending is calculated, how canceled card transactions are handled, what spending categories are excluded, how prepaid card spending is recognized, which loan agreements qualify for a spending grace period, and how spending on family-linked cards is aggregated. For loans with terms of five years or more, banks will be required to send this information at least once a year.

The reformed rate-discount framework will be rolled out bank by bank after each institution revises its loan agreements, updates its systems and trains staff, with implementation expected between September and October for new borrowers. Existing borrowers will be brought under the new rules at each bank after October. Hana Bank has already been operating under the new framework since June 30.

"We expect this overhaul to protect consumer rights, promote sound business practices and help prevent disputes before they arise," an FSS official said.