Min Byung-deok: Card Company, General Merchants Deceived
Concerns have been raised that credit card companies are exploiting a system for calculating qualification costs to offset reduced profits from lowered commissions for small and medium-sized businesses.
Data presented to the National Assembly’s Political Affairs Committee indicates that general affiliates generated 552 trillion won in credit card sales last year. This represents 73.3% of the 754 trillion won in total credit card sales across all merchants, including small and medium-sized enterprises.
As of February, merchants are categorized as follows: 72.1% have annual sales below 300 million won, 23.6% are small and medium-sized businesses with annual sales between 300 million and 3 billion won, and 4.2% have annual sales below 100 billion won.
Notably, over 70% of total sales originate from general affiliates, which constitute only 4.2% of all merchants.
A representative stated, Credit card companies are undermining the government’s intention to reduce the card fee rate by lowering the small and medium-sized merchants’ card commission rate and raising the general merchant fees significantly.
The government has implemented a policy aimed at reducing card fees to alleviate the burden on small and medium-sized businesses.
The Financial Services Commission previously announced a reduction of 504 million won in fees, benefiting small credit card merchants, sub-payment agencies, and taxi operators.
According to reports, card companies informed general merchants of fee increases immediately after the government announced commission cuts for smaller merchants. The fee increase policy was communicated to representative merchants, known as ’PG companies,’ via official documents, who then notified the lower-tier general merchants.
The core issue is that the additional profits earned by card companies from increased general merchant fees reportedly outweigh the profit reductions resulting from lower commissions for small and medium-sized businesses.
Analysis of last year’s transactions reveals that while credit card companies experienced a 27 billion won reduction in profits due to the commission reduction policy, they gained an additional 42.7 billion won from increased general merchant fees.
In the first half of the year,merchants with annual sales below 3 billion won numbered approximately 3,059,000,representing about 96% of all merchants. Though, their credit card sales totaled 201.2 trillion won, only 27% of total credit card sales.
Conversely, general affiliates, numbering around 135,000 (approximately 4% of the total), generated 552 trillion won in credit card sales, accounting for about 73% of the total.
this sales structure suggests that increased commissions for general merchants significantly impact card company profits, necessitating a more precise approach to fee policy adjustments for this sector.
The increase in the fee of the card company can eventually result in passing the burden on the final consumer,
a source stated.
Some argue that financial authorities should penalize the unilateral increase in general merchant fees to ensure fairness in the market. However, financial authorities have reportedly not disclosed the cost of qualification cost calculation to the National Assembly.
A representative commented, We need to check how much the card company has benefited by adjusting the commission through the qualification cost calculation.
Credit Card Fees: What You Need to Know
Table of Contents
- Credit Card Fees: What You Need to Know
- What are the main concerns about credit card fees?
- How are fees impacting different merchants?
- Are credit card companies increasing fees to compensate for reduced commissions?
- What is the government’s role in regulating credit card fees?
- Why is the fee increase a concern?
- What are the key issues in fee adjustments?
Credit card fees are a constant subject of scrutiny, with consumers and regulators alike keeping a watchful eye on how these charges impact both businesses and individuals. This article provides a comprehensive overview of the key issues surrounding credit card fees, addressing common questions and concerns.
What are the main concerns about credit card fees?
The main concern revolves around the potential for credit card companies to exploit the system for calculating qualification costs, particularly to offset reduced profits from lowered commissions for small and medium-sized businesses. There is a perception that card companies are increasing fees on general merchants to compensate for government-mandated reductions in fees for smaller businesses.
How are fees impacting different merchants?
Merchants are categorized based on their annual sales:
72.1% have annual sales below 300 million won
23.6% are small and medium-sized businesses with annual sales between 300 million and 3 billion won
* 4.2% have annual sales below 100 billion won
Over 70% of the total credit card sales originate from general affiliates, which constitute only 4.2% of all merchants. This concentration of sales within a small percentage of merchants raises concerns about the impact of fee adjustments.
Are credit card companies increasing fees to compensate for reduced commissions?
Yes, there are reports suggesting that credit card companies are raising general merchant fees in response to government policies aimed at reducing fees for smaller merchants. This has led to concerns that card companies are undermining the government’s intention to reduce the burden on small and medium-sized businesses. While commission cuts for smaller merchants resulted in a 27 billion won reduction in profits for card companies, they gained an additional 42.7 billion won from increased general merchant fees based on last year’s transactions.
What is the government’s role in regulating credit card fees?
The government is actively involved in regulating credit card fees with policies aimed at reducing fees to alleviate the burden on small and medium-sized businesses. The Financial Services Commission has previously announced fee reductions for small credit card merchants and other operators. However, the government’s approach to fee policy adjustments, particularly for general merchants, necessitates a closer examination to ensure fairness and transparency.
Why is the fee increase a concern?
The increase in fees can lead to the burden being passed on to the final consumer. if businesses face inflated credit card fees, these costs may be partially transferred to the end consumer.
What are the key issues in fee adjustments?
The core issue is that the additional profits earned by card companies from increased general merchant fees reportedly outweigh the profit reductions resulting from lower commissions for small and medium-sized businesses. This raises questions about the fairness and transparency of fee adjustments.
Summary of Merchant categories and Sales
| Merchant Category | Percentage of Merchants | Percentage of Total Sales |
| :————————————————– | :———————- | :———————— |
| Annual sales below 300 million won | 72.1% | N/A |
| small and medium-sized businesses (300M-3B won) | 23.6% | 27% (first half of year) |
| Annual sales below 100 billion won | 4.2% | 73% |
| General affiliates | 4.2% | 73% |