South Korean Government Announces Its Plan To Cut Credit Card Fees For Small Businesses By 1.5 Percent In 2016

The South Korean government on Monday declared its plan to lessen the credit card charges for small businesses starting next year. According to Korea Herald Nov. 2, the measure aims to relieve these small merchants from financial troubles.

Reports have revealed that the Financial Services Commission (FSC) and the ruling Saenuri Party agreed to set credit card commission charges at 0.8 percent that will be implemented on small businesses with yearly sales of 200 million won or less.

The proposed rate is lower than the current credit card charges at 1.5 percent. In addition, the South Korean government plans to impose the new rate starting next year.

Aside from that, taxes on medium-sized merchants earning 2 to 3 billion won will be decreased from 2 percent to 1.3 percent. Tariffs on businesses with less than 1 billion annual sales will be lessen from 2.2 percent to 1.9 percent.

According to FSC, around 2.39 million trade businesses will benefit from the slashing of credit card fees, saving a total of 670 billion won within a year.

"We mapped out the commission fee reduction plan based on a drop in card firms' borrowing costs and other related improvements," FSC said. "They will manage the decline in such revenues."

Meanwhile, card companies reportedly are complaining on the government's plan to cut credit card fees, with some of them consider the move as a populist policy that intends to earn votes for the general elections.

Card issuers complained that slashing of credit card fees would greatly affect them. Despite this, card companies will still have to follow the regulation of the FSC since they had no other options.

"If the regulator asks us to follow it, we have no choice but to do so," a spokesman from a credit card company said, as noted by Korea Times. "However, it will undermine our business a lot because the fee is one of two key revenue sources along with interest from loans."