Credit card commissions charged to small businesses lowered

Economy

Published: 23 Dec. 2021, 15:26 Updated: 23 Dec. 2021, 19:25

Credit card commissions charged to small businesses lowered

A store in Seoul swipes a credit card on Thursday. The FSC has announced that the commission charged on small business owners will be lowered to ease the burden from the ongoing Covid-19. [YONHAP]

Commissions charged to businesses for the processing of credit-card payments have been reduced.

The rate for businesses with less than 300 million won ($252,500) in annual revenue will fall to 0.5 percent from 0.8 percent, the Financial Services Commission (FSC) said Thursday.

Small companies, especially shops, have been hit hard by the re-imposition of social distancing guidelines, and the regulators are responding to the hardship they face.

"The small business organization raised the need to ease the commission citing the difficulties caused by Covid-19," FSC Chairman Koh Seung-beom said ahead of a meeting with Democratic Party lawmakers on Thursday.

The rate announced by the FSC is a guideline.

For companies with revenues between 300 million won and 500 million won a year, their rate will lowered from 1.3 percent to 1.1 percent. For those with revenue of between 500 million won and 1 billion won, the rate will drop to 1.25 percent from 1.4 percent. For companies with annual revenue of 1 billion won to 3 billion won, the rate will drop to 1.5 percent from 1.6 percent.

This is the first change in the commission guideline since 2015, when the rate was lowered from 1.5 percent to 0.8 percent for the smallest companies.

It is the second move by Moon Jae-in government to reduce credit-card-related costs for small businesses. In 2018, the administration expanded the range for the smallest business category, from a maximum of 200 million won in revenue a year to 300 million won, while the cap for the second category was upped to 500 million won.

The FSC estimates that the 2015 adjustments have saved small business 670 billion won a year, while the 2018 adjustments saved them roughly 1.4 trillion won a year.

Credit card issuers can afford to give small business a break due to low interest rates and lower costs as a result of an increase in online marketing and sales, the administration argues.

In 2020, the eight credit card exclusive companies — Shinhan, Samsung, KB Kookmin, Hyundai, Lotte, Woori, Hana and BC Card — reported a 23.1 percent increase in its net profit, from 1.65 trillion won in 2019 to 2.03 trillion won.

Total costs including marketing and labor expenses fell 2.1 percent during the same period.

Changes to the commission rate are based on the revised Specialized Credit Finance Business Act of 2012, where the financial authority every three years reviews credit card and debit card commissions.

FSC Chairman Koh Seung-beom, third from left, in meeeting with the ruling Democratic Party to dicuss on credit card commission rate at the National Assembly in Seoul on Thursday. [YONHAP]

Approximately 300 small shop owners gathered in Gwanghwamun, central Seoul, on Wednesday to protest to the government's reintroduction of social distancing regulations, which they claim is virtually a lockdown.

One coffee shop openly defied the government's social distancing rules by staying open 24 hours a day, with the store owner posting a notice daring the government to enforce the rules.

Store owners, who had high hopes ahead of the Christmas holiday season, claim that the government has betrayed an earlier promise of returning to normalcy, especially as President Moon said on Nov. 29 that there would no retreat from the reopening.

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