ED Vote-gathering gimmick

Credit card fee cuts offer little help for small businesses

Credit card processing fees will be reduced in the run-up to the March 9 presidential election. The government and the ruling party said the move is aimed at easing financial difficulties facing small businesses and self-employed people amid the protracted COVID-19 pandemic. However, it is doubtful what substantive help the miniscule cuts could give to pinched small business owners, most of whom already pay card fees that are at near-zero rates. Instead, one feels that the governing camp is trying to impress voters ahead of the election by twisting the arms of credit card companies under the pretext of supporting people's livelihoods.

For instance, the commission rate for owner-operators with annual revenues of below 300 million won ($252,550) will be lowered from 0.8 percent to 0.5 percent. The number of credit card member stores with yearly sales of less than 300 million won reaches about 2.2 million, or 75 percent of the total. The rate cuts are likely to save 470 billion won in total card fees. Still, the benefits for individual stores will mostly be indistinguishable.

Many self-employed people gathered at Gwanghwamun Square in downtown Seoul last Wednesday not to protest high card fee rates, but plunging revenues due to tight business curbs.

At the protest rally, complaints poured out about the government's quarantine policies, including the abrupt introduction of a vaccine mandate, blasting their hopes for a year-end sales boom. The prolonged pandemic along with the failure of some quarantine policies, coming on top of declining sales due to sharply raised minimum wages, have driven some small merchants to extreme situations. The government should compensate them sufficiently in any way it can.

However, squeezing credit card companies is not the answer. Moreover, the lower the card fees, the smaller the benefits for consumers, as cost-conscious card companies reduce interest-free installments while raising annual dues. Korea is the only country where the government sets card fee rates. The paradox between card fees and consumer benefits demonstrates the adverse effects of price control. The card commission rate has been lowered no fewer than 13 times over the past 12 years as a vote-gathering scheme by the governing camps. Until when will the government repeat the outdated practice of taking credit for lowering fees?