[EDITORIAL] Keep Cardholders in Mind

On Tuesday the Fair Trade Commission ordered the nation's top three credit card firms (BC, LG, and Samsung) to lower the commission they charge on cash advances and their interest rates on unpaid balances. The Office for Government Policy Coordination yesterday also issued a directive to lower the commissions participating retailers are charged. The credit card companies expressed their dissatisfaction with the FTC ruling, saying they would file a protest, but in view of the current low cost of funds, it is quite clear that rates are too high.

The card providers say their main customers are people who are bad credit risks, and they assert that interest rates for cardholders are high because the card companies have to pay higher rates than banks to procure funds. However, according to the FTC statement, card firms are paying less than 10 percent interest but are charging cardholders more than 25 percent. This is excessive. Interest on personal bank loans stands at less than 10 percent, and since the 1997-1998 recession, interest the card companies are paying has dropped greatly, as has the number of defaulters, yet the interest the card providers charge has changed hardly at all. The FTC's judgment is that the card companies are abusing their oligopolistic position in the market by keeping interest rates high. Card providers appear to have no ready answer.

Card companies have brought higher credit risks upon themselves for the most part. They have freely issued cards to such people as college students who have no income and people who misrepresent themselves, and yet they seem to expect their cardholders to pay for their folly.

With 57 million credit cards issued in Korea as of the end of last year, plastic money is no longer a luxury here but a necessity. Last year alone, the amount of money spent with credit cards came to 221 trillion won, or more than 40 percent of GDP. Even though cards have become commonplace, the public still harbors dissatisfaction. The card companies should reflect on that old key to marketing success: manage your business with customer satisfaction as your goal. If they did, they would not have to be ordered to lower their rates but would do so on their own.