Gov’t puts credit card commissions in its sights

As the government tries to ameliorate the damage done by its jacking up of the minimum wage, it is now trying to help small businesses get a better deal from credit card companies.

In a meeting with Blue House aides on Monday, President Moon Jae-in said the government will work swiftly on measures to make up for the impact on small businesses like restaurants and convenience stores, including lowering commissions charged by credit card companies to a “rational” level.

On Tuesday, pressure to lower credit card commissions came from both the government and the ruling Democratic Party.

The Democratic Party on Tuesday announced that it reached an agreement with the government to resolve some difficulties small businesses face, including lowering credit card commissions as well as limiting excessive increases in rents on premises and unfair contracts.

“It is important to help small businesses secure their incomes and the ability to pay their employees to allow them to maintain their staff,” said Hong Young-pyo, the ruling party’s floor leader.

The credit card industry is hardly happy with the direction of the government and ruling party’s thinking, arguing that in the past 10 years it has been lowering commissions charged on credit card use.

According to the Credit Finance Association, credit card commissions charged to vendors, which were 4.5 percent in August 2007, have been lowered to a maximum of 2.5 percent on average for small businesses, including restaurants and convenience stores.

The lowest commission was adjusted to 0.8 percent in 2016 from 1.5 percent in 2013 for businesses with annual revenues of less than 200 million won ($177,612).

For businesses with annual revenues of less than 300 million won, the commission was lowered from 2 percent in 2015 to 1.3 percent in 2016.

However, in 2017, the Moon government allowed business with revenues of less than 300 million won to be included in the 0.8 percent commission rate.

Slightly larger businesses have argued that they pay larger commissions - 2.5 percent - than major discount chains and department stores, which are charged between 1.5 percent and 1.8 percent. In the case of Costco, it has been reported that it only pays a commission of 0.7 percent.

Although next year’s minimum wage has not yet been finalized, the Minimum Wage Commission over the weekend voted in favor of raising next year’s minimum wage 10.9 percent to 8,350 won per hour. The decision was made even after a boycott by representatives of employers, who argued that the hike would unfairly increase the burden on small businesses, which also include rising rents, and drive them out of business.

The Financial Services Commission is looking into the possibility of revising a law that forces all businesses to accept credit cards, even for small payments less than 1,000 won. If this regulation is abolished, convenience stores can demand cash and save the commission.

Roughly 70 percent of payments made at convenience stores are reportedly made by credit card and a significant number is under 1,000 won.

BY LEE HO-JEONG [lee.hojeong@joongang.co.kr]