This document discusses both the benefits and drawbacks of using credit cards. The benefits include cashback rewards, airline miles, discounts at various stores and services, and secondary rental car insurance. However, credit cards also have annual fees and restrictions on rewards. They can encourage overspending and give the psychological impression of having more money than actually available due to delayed payments. While amortizing large payments over time enables purchases and protects against business closures, it also obscures spending and can incur interest fees. Overall, credit cards can help build credit history and scores for lower future rates, but debit cards receive slightly higher tax deductions in Korea.

1. Are Credit Cards Evil?
Sumin Byeon <suminb@gmail.com>

2. Nothing is black and white in this world

3. Benefits
• Cashback
• Airline mileages
• Discounts at restaurants, gas stations, malls, theaters, hospitals,
amusement parks, bookstores and more
• VIP lounges at airports
• Secondary insurance for rental cars
• Other auxiliary services

4. Benefits
• Annual fees (no free lunch!)
• Restrictions may apply
• E.g., You have to spend $500 in the previous payment period to be eligible for benefits in
the current payment period
• Makes life much more complicated
• Which restaurants do I get a discount from?
• You have to order A with B that comes with C but you cannot order D in order to get a
discount
• That Asiana ticket is cheaper than the Korean Air’s by $20 but my credit card gives me 1.5
Korean Air mileages for every dollar I spend. How much are my Korean Air mileages worth?
• May encourage overspending

5. Delayed Payments
Spend $1,500
4/1 5/1 6/15/15
Pay $1,500

6. Delayed Payments
• As long as payments are made on time, there is no interest, no fees
• Cash in pocket is a power
• Earns you money (e.g., interests)
• Provides you a potential to earn money
• Inflation - a dollar today is not the same as the dollar of yesterday
• Your income (generally and hopefully) increases overtime
• As a rule of thumb, it’s always better to get paid as early as possible, pay as late
as possible

7. Delayed Payments
• Psychological trap that makes you believe you have more to
spend than you actually do
• Alleged for causing overspending
• 신용카드보다 체크카드 선호 이유는 '과소비 방지' <전자신문>
• 신용카드 사용자 중 반 이상이 충동구매 경험, 보도자료 <경기도뉴스포털>
• 나는 왜 카드를 잘랐나 <오마이뉴스>

8. Debt Amortization
Amortization refers to the process of paying off a debt over time
through regular payments. A portion of each payment is for
interest while the remaining amount is applied towards the
principal balance. [Wikipedia]

9. Debt Amortization
• Makes it possible to purchase expensive goods or services at the
earliest convenience (e.g., hospital bills)
• Provides some level of protection when you make a lump sum of
payment for a long term service (e.g., haircuts, fitness clubs) and
they go out of business in the middle of the contract
• '할부항변권'이란 계약을 철회할 수 있는 기간이 지났다 하더라도 할부금 지급을 거절할 수
있는 권리로서 소비자가 20만원이 넘는 물건을 3개월 이상 할부로 구입한 뒤 합당한 이유
가 있을 때 할부금 잔액을 내지 않아도 되는 권리를 말합니다 [금융감독원, 금융소비자보호
백서 (2011), 368면]

10. Debt Amortization
• Induces obscurity in bookkeeping
• How much have I spent so for in this month?
• How much can I spend in the remaining days?
• May incur interests and/or fees

11. Building Credit History
• Credits are collateral in modern society
• Without the help of credits, borrowers must present some tangible
assets (e.g., houses, cars, factory equipments, etc.) as a collateral
• Collateral is a borrower’s pledge of specific property to a lender, to
secure repayment of a loan [Garret][O’ Sullivan]
• Generally a good idea to start building credits at early ages
• Higher credit scores lead to lower interest rates

12. Tax Returns
• (NOTE: Here we are mainly concerned about income tax)
• In Korea, tax laws favor debit cards over credit cards
• For spendings that exceed 25% of your annual income in any fiscal
year
• 30% of tax deduction with debit card spendings
• 15% of tax deduction with credit card spendings
• Up to 3,000,000 KRW

13. What do you think?
Would you use credit cards?
Why or why not?