By Baek Seung-mi
Global Student Reporter
Credit cards are convenient for a secure, reliable and convenient payment. According to research by the Korea Financial Telecommunications & Clearings Institute (KFTC), the rate increase on the use of plastic by South Korean customers was number one in the world in 2005. The research showed that the figure for credit card use swelled from $405 in 1996 to $2,023 billion in 2003.
The Credit Finance Association announced at the beginning of the year the rate of credit card payments increased 18 percent compared with 2008. It indicates that using a credit card has become very common in Korea.
People can buy everything with credit cards. However, universities are one of few places where the plastic is useless. They don't accept credit cards for tuition from students. Many universities do so because of fees that they pay to credit card companies for transactions and the value students get from this service.
Of some 400 universities, only 60 accept credit cards for tuition payment. In 2002, credit card companies charged a rather low commission fee to compete with other companies. So, universities did not care much how students paid tuition. But with an economic slump in 2003, credit card companies started to increase service charges, the reason behind universities rejecting credit card payments.
Universities say that they cannot support the commission fee because they don't have enough operational funds. If people cannot use plastic to pay tuition and fees, they need to think about a student loan. Yet, the interest rate of the student loan is so high that it does not aid students or parents to pay tuition fees. Even though the basic interest rate fell a little in comparison with 2008, students or parents have to defray the interest rate spread as well.
For the first semester of 2009, the basic interest rate for student loans was 7.3 percent. This rate is four times higher that last year. The interest rate of student loans is apparently higher than the average rate for collateral loans that is about 6 percent. Authorities insist that fixing an interest rate is inevitable as the rate was decided by corporate bond yields.
Choi Song-a, 24, a student, went a bank to ask for student loan, but the banker turned her down. The reason is that her credit rating was low. Since her family cannot shell out for her tuition fees, she has had to work several part-time jobs without holidays.
Like Choi, students who were rejected by banks reached 23,246 in 2008 up from 3,031 in 2007. The Korea Housing Finance Corporation created a credit scoring system ― a number that measures students' credit worth. Students feel upset by the system because most of them cannot prove their economic potential to guarantee their credit.
According to the survey of Employment Portals Career's site in Korea, 52 percent of 907 students are considering leaving school due to tuition cost rising. College tuition averages 4-5 million won per semester. As credit card payments are not available, parents and students are feeling difficulty.
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