Credit cards have become a daily necessity in today’s credit-based society because they enable customers to buy goods even without cash on hand. Due to their convenience, the amount of credit card payment has steadily increased in Korea. This means that more and more consumers are using credit cards as their means of payment and that stores that do not accept credit cards or charge high commission fees might lose their customers. In Korea, credit card commission rate for street market merchants and mid-size retailers were higher than that of department stores and hypermarkets (A superstore which combines a supermarket and a department store. Examples are Wal-Mart in the US or E-Mart in Korea). As using credit cards in street markets or mid-size retail stores became costly and inconvenient, more and more customers chose shopping in large stores. Consequently, street merchants and smaller retailers, mostly consisted of low income households, lost their customers.
The Financial Services Commission (FSC), which has been consistently taking measures to help low income households to overcome financial difficulties, has recently announced a policy to lower credit card commission rate of those markets down to about the same level as that of department stores and hypermarkets.
This credit card commission rate reduction policy covers credit card affiliates in conventional markets, whose yearly revenue is below 96,000,000. Their commission rate are down from 2.0~2.2% to 1.6~1.8%, which is about the same as that of hypermarkets in Seoul (1.6~1.9%). Mid-size retailers, with yearly revenue below 96,000,000, are also beneficiaries from this policy. Their rate has gone down from 3.3~3.6% to 2.0~2.15%. For reference, the commission rate of department stores in Seoul is 2.0~2.4%. And as mid-size retailers’ rate decreased, the rate of small-size retailers, whose yearly revenue is below 48,000,000, also went down from former 2.0~2.3%.
As a result of this policy, commission rate gap between conventional markets & mid-size retailers and department stores & hypermarkets was almost closed. The FSC expects this policy to save approximately 100,000,000,000 in 2010 and more in years afterwards for street merchants and small retailers.
In order to make sure this policy is effectively implemented, the Report Center for Credit Card Affiliates was established on April 1st, 2010, and is now operated by Financial Supervisory Service (FSS). Any noncompliance cases or breaches of this policy can be reported to this center and be properly addressed. Furthermore, FSC is planning a thorough check-up on credit card commission rate operation status in May and June.