By Yoon Ja-young
Staff Reporter
Small shops and credit card companies are clashing over credit card transaction fees, leading the Financial Services Commission (FSC) to schedule a public hearing on credit cards this month.
Small vendors, suffering from the economic slowdown, have been continuously demanding that card firms lower transaction fees. The financial regulator has been indirectly pressuring credit card firms, checking their fee systems twice this year. They have cut fees a few times, but small vendors are saying that it's not enough. Credit card companies are complaining that they too are having difficulties due to the economic slowdown and rising interest rates.
The FSC is especially unhappy that card companies levy higher fees on small shops. Currently, credit card companies levy around 2 to 3.5 percent for transaction fees, but the rate is higher for small shops than outlets or department stores.
However, credit card companies say that it is natural for them to levy small fees on big businesses. Since they do a lot of credit card transactions, the average cost is smaller for card firms. Thus, they can cut fees at bigger outlets.
At the hearing, there will be a discussion on whether it is okay to give a discount to customers who pay cash. Small shops have said that they should be allowed to give a discount to those who pay in cash.
However, some are suspicious that small shops are demanding the incentive for cash payers to evade taxes. The National Tax Service has been giving tax deductions on credit card use, and it helped plug loopholes allowing tax evasion. Shop owners, however, are often tempted to omit income when filing to the tax agency to save on value added tax.
The financial regulator is also proposing to give more tax deductions on debit cards. Debit cards, which immediately subtract funds from a bank account, have lower card transaction fees than credit cards.
``The association of small vendors should have the right to negotiate with credit card firms over fees,'' said Cho Kil-jong, a professor at Kookmin University. Department stores, for example, succeeded in lowering down the fees by up to 16 percentage points thanks to group bargaining with credit card companies back in 2000.