|Seen above are stickers showing credit card partnerships at a restaurant in Myeong-dong, Seoul, in this file photo. Korea Times file|
By Kwak Yeon-soo
E-mart and other retailers are benchmarking Hyundai Motor to more effectively deal with demands from credit card companies that stores pay higher card transaction fees, according to company officials Thursday.
The officials said higher card fees could curtail their promotional activities and even force them to raise prices at the expense of shoppers.
Hyundai Motor and its affiliate Kia Motors have completed negotiations with credit card issuers on transaction fees as the card issuers agreed to terms set by Korea's top two carmakers.
Hyundai and Kia pressed domestic card firms by threatening to end business ties with eight of them ― Shinhan, KB Kookmin, Samsung, Lotte, Hyundai, NH NongHyup, Citi and KEB Hana Cards ― unless the card issuers accept their terms.
For instance, Hyundai and Shinhan agreed to raise the fee rate by 0.05 percentage points to 1.89 percent, a rate much lower than the card firm had sought. The carmaker also made similar agreements with other card issuers.
Major discount store operators, department stores and other retailers are currently in negotiation with credit card issuers over the latter demanding a hike to 2.1 percent from 1.9 percent.
"Fee hikes were applied this month, but we are currently in discussion with credit card firms to lower the increase they demanded," an official at a major department store said. "If we settle on the case, the transaction fee rise will be paid retroactively to March."
The official also expressed discontent at card firms' plans to raise transaction fees, saying the change will impede their promotional activities.
"It is imposing a heavy burden on us because we handle a high volume of card payments. Nearly 80 percent of our customers make purchases with credit cards. The consumer sentiment has been weakening too," he said.
The fee hike dispute comes as credit card firms here decided to charge higher fees to big-money clients in response to the government's local card transaction fee regulations that took effect in November.
The Financial Services Commission allowed credit card issuers to claim higher "marketing activity fees" from client firms with an annual revenue exceeding 50 billion won, enabling fees to be raised by up to 0.25 percentage points.
By contrast, it ordered credit card issuers to lower their transaction fees for small businesses with less than 3 billion won in annual revenue.
Likewise, local discount chain operators claimed there was "no clear reason" for rates to be increased and they called for credit card firms to present convincing reasons to back their demands.
"We have demanded data to provide grounds for their increases. It's hard to accept the new terms because the interest rate has declined for three years and the qualifying fee has also dropped," an E-mart official said.
According to card firms' financial data, the interest rate paid by the Shinhan Card was set at 2.8 percent for the 2015-2017 period, down from the average 4.29 percent from 2012 to 2014.
This shows the card firm was securing loans at lower interest rates, thus decreasing its costs. KB Kookmin Card also saw a 0.9-percentage-point drop in its interest payments during the same period.
"It seems like credit card issuers are shifting their burdens onto us after overspending to attract customers," the official said.