By Kang Seung-woo
After a long resistance, refiners have reluctantly joined the government’s move to tame soaring inflation by cutting oil prices.
Now they insist it is time for the local credit card sector to join the move with lower commission on fuel prices.
Card issuers say that the oil industry’s claim is buck-passing because structurally high oil prices are their own business, turning it into a mudslinging contest.
“We will continue to ask card companies to slash commission imposed on credit card sales at gas stations. Card firms take a 1.5 percent commission on oil sales and with the price of fuel jumping of late, they have taken bigger fees, which we believe contributes to the higher cost of fuel,” said Kim Sang-hwan, head of planning the team at the Korea Oil Association (KOA).
According to Kim the ratio of credit card settlement at stations mounted to 90 percent last year, with sales reaching 42.3 trillion won.
“Despite the current high prices, the credit card sector has solely benefitted from it, so they need to cut commission rates in order to help troubled consumers and affiliates.
“If the commission drops to 1 percent, we estimate that the reduction will ease the burden on consumers, which is valued at about 200 billion won.”
The oil refiners’ call for a fee decrease came after the government pushed the industry to cooperate with its plans to curb fast-growing consumer prices.
As a result the nation’s four major fuel companies, SK Innovation, GS Caltex, S-Oil and Hyundai Oilbank, cut gasoline and diesel prices by 100 won per liter from Thursday.
The oil sector also plans to take issue with oil-related taxes.
In Korea, a variety of taxes account for about half the prices of oil products.
“The commission imposed on taxes related to oil should be lowered or ruled out,” Korea Petroleum Association Chairman (KPA) Oh Kang-hyun said in February.
“The profit margin of a filling station is around 5 percent, but 1.5 percent of it goes out as card commission. That is why we keep oil prices high.”
Kim said, “It is unreasonable to slap commission on fuel taxes, which the government pockets. A service station’s nominal card fee ratio is 1.5 percent, but considering the taxes, the real commission amounts to 3.5 percent. With a 0.5 percent reduction in commission, the ratio would effectively be 2.3 percent.”
He said that the bill to cut the fee on taxes has been moved to the National Assembly.
Despite the continuing allegations by the oil refiners, they are falling on deaf ears at the card companies.
“Their calls for a cut in commissions are aimed at not slashing oil prices but increasing the profit margins of fuel companies,” a card industry official said on condition of anonymity.
“Allowing for public interest, the card industry has not touched the lowest fee of 1.5 percent since 1983.”
He added that the commission at service station billings is lower than that of traditional markets, where the fee ranges between 1.6 percent and 1.8 percent, and that of department stores, which pays a 2 percent to 2.15 percent commission to card firms.
In addition, he put a question mark on whether consumers would actually benefit from any reduction.
“Assuming the price of oil is 2,000 won per liter, the current commission is 30 won, but it will be 20 won if the ratio goes down to 1 percent, meaning consumers can save only 10 won per liter,” he said.
The card industry made it clear that it will not lower or rule out fees on oil-related taxes, saying that it would pose a serious equity issue with that of taxes on other products such as cigarettes and liquor.
“We levy card fees on national and local taxes. The KPA chairman’s claim is covertly trying to dump the oil refiners’ burden of high taxes on card issuers,” he said.
Meanwhile, consumers are concerned they will become victims of the catfight, as they did in a dispute between card issuers and life insurers.
Last year the two sides collided over payments by credit card for savings-linked insurance, with insurers just accepting cash payments.
“If only cash payments are permitted at gas stations, consumers would suffer,” said a Seoulite, who owns a car.