Holiday is just about over for free credit installments

Home > Business > Finance

print dictionary print

Holiday is just about over for free credit installments

테스트



Consumers are likely to be inconvenienced again starting Sunday as credit card companies stop offering interest-free installment-based payments at large discount chain and department stores a few weeks after they resumed the service for the Lunar New Year holiday shopping season.

According to industry insiders, five card companies - Shinhan, Samsung, Hyundai, Lotte and Hana SK - will stop the service starting Sunday, while BC Card and KB Kookmin Card will follow suit Feb. 28.

“We have continued trying to negotiate larger transaction fees for big companies, but we haven’t made progress,” said an employee at a credit card company. “It’s difficult to continue the interest-free installment-based credit card payment service at big retailers when negotiations are at a standstill.”



Why fees matter

The disputes on credit card payments reached a turning point when retailers stopped offering interest-free credit card payments with enforcement of the credit finance law on Dec. 22. The law requires credit card companies and retailers to split the cost of interest payments.

And it bans credit card companies from covering more than 50 percent of marketing costs for special events like interest-free installment-based payments with retailers with 100 billion won ($91.4 million) or more in annual revenue. Until last year, credit card companies covered most of the interest payments themselves. Retailers have protested the revision and limited payment options.

Last year alone, credit card companies have spent 1.2 trillion won on interest-free installment based payment services, which accounts for 24 percent of overall marketing expenses. They now want to reduce the expense.

“Retailers have taken customer rights hostage to secure the upper hand in negotiations about splitting interest payment costs with credit card firms,” said Moon Hye-min, a 38-year-old shopper at E-Mart’s Seongsu branch in central Seoul last Friday. “Do they expect us to be grateful for offering the service temporarily? They let us shop with interest-free installment based credit card payments temporarily in January and February because they cannot give up profits generated during the period when customers spend a lot to prepare food for the Lunar New Year holiday and buy gifts for children’s graduation ceremonies.”

Apart from interest-free installment-based credit card payments, customers are likely to become the scapegoat in another round of tug-of-war between credit card companies and big businesses.

Paying mobile phone and Internet bills using a credit card auto-pay service has become difficult as card companies plan to increase transaction fees.

Earlier this month, KB Kookmin Card notified customers that SK Broadband, the Internet service provider of the country’s No.1 mobile carrier SK Telecom, said it will stop offering auto-pay services to new customers.

If customers want the auto-pay option, they need to arrange it directly with their telecom company. Card companies want to raise transaction fees to between 1.8 percent and 1.9 percent; telecoms want to keep the fees under 1.5 percent.

In January, SK Telecom, KT and LG U+ stopped allowing mobile phone users to sign up for automatic payments through credit card firms.

Market observers said conflicts over transaction fees surfaced when credit card companies slashed fees charged to mom-and-pop stores in September in response to government pressure.



More inconvenience

Paying other bills, such as apartment maintenance fees and college tuition with credit cards, is likely to become more difficult or halted.

According to a Web site (www.academyinfo.go.kr) run by the Ministry of Education, Science and Technology, 34.5 percent, or 157 of 456 universities, accept credit cards for tuition and fees. But since credit card firms raised their fees to more than 2 percent in December, colleges have been considering their options.

The Financial Consumer Agency urged the Education Ministry to require colleges to accept credit cards after it received reports that students attempting to pay were being rejected.

The agency said colleges this year have raised transaction fees to an average of 1.8 percent from 1.7 percent.

“Given the difficult household economy, colleges’ rejecting credit card payments greatly infringes on students’ rights to learn. The education ministry shouldn’t sit idly by and watch,” said Cho Nam-hee, head of the agency. “If it turns out that even one college student was deprived of his right to study because of the credit card payment option, we will ask the colleges and ministry to take responsibility.”

Paying apartment maintenance fees with a credit card also could be eliminated as Aegis Enterprise, a payment gateway company that handles 3.6 trillion won in apartment maintenance fees annually, is considering ending its contract with credit card companies in September, when a revised credit finance law mandating a 2 percent transaction fee takes effect.

Currently, Aegis Enterprise pays no transaction fees to credit card companies.

In a separate but related matter, the Credit Finance Association said yesterday that Koreans purchased 520.9 trillion won of goods and services last year with credit cards, up 62.1 trillion won year-on-year.

“To help the new credit card transaction fees to settle in the market, retailers and credit card companies must work together to reach a compromise over transaction fees,” said Kim Byeong-deok, a research fellow at the Korea Institute of Finance. “In addition to complying with the financial regulator’s efforts to protect socially vulnerable classes by making the market more reasonable, they should create an environment where they can earn more trust from customers.”


By Kim Mi-ju [mijukim@joongang.co.kr]



More in Finance

Color of Chuseok

Kospi tumbles to 7-week low as economic prospects dim

BC Card opens big data lab in Busan

Bank of Korea expands support for small businesses

Kakao Bank to start preparing to go public

Log in to Twitter or Facebook account to connect
with the Korea JoongAng Daily
help-image Social comment?
lock icon

To write comments, please log in to one of the accounts.

Standards Board Policy (0/250자)

What’s Popular Now