Many Drops Cause a Flood

“The commission fees for my yearly bank account are almost equal to my account’s yearly deposit interest.”

Kim Sung-ho, a director of an advertisement agency, claimed the above in surprise after punching some numbers into his calculator, with his bank account balances by his side. The annual amount of commission that Kim had to pay was 147,000 won. The figure was close to the 156,000 won of interest he receives annually from his 5 million won fixed deposit (3.9 percent per annum) after paying taxes.

The commission fees Kim paid for sending money to his parents back home, his younger brother in college, and his high school alumnae organization amounted to over 70 thousand won a year. The high fees were due to completing each transaction at a different bank and that he used teller’s windows. Using ATMs of different banks to draw out money after the banks’ regular business hours was another factor.

The burdens of high commission fees on consumers are increasing as banks have shifted their marketing strategies towards making profit by charging various commission fees, rather than gaining profit from the favorable difference between deposit interest and lending for the banks interest. Experts say that alternative consumer strategies to cut back on commission fees should be planned.

-- Banks Increase Commission Fees

Shinhan and Chohung Banks both increased their commission fees last month, and Hana Bank will raise its fees starting next month.

Hana Bank will charge 1,000 won instead of 800 won for drawing money out of other banks’ ATMs during business hours, and 1,200 won rather than 1,000 won for ATM withdrawals outside business hours. Additionally, the commission fees for transferring money to other accounts outside of business hours using any bank’s ATM will increase from 500 won to 600 won.

Korea First Bank and Woori Bank will also increase their commission fees in June at rates similar to Hana Bank’s. Kookmin Bank has decided to begin imposing commission fees for tax payments or remittance.

-- Techniques to Face Commission Necessary

In order to face the emerging trend of high commission fees, experts say that efforts to adapt to Internet banking, or to choose to visit one fixed bank to complete transactions, are necessary.

The commission fees for a bank account transfer costs consumers 1,000 to 4,000 won when using a teller’s window; 1,000 to 2,100 won when using an ATM; and free of charge or 500 to 600 won maximum when using Internet banking. Banks also give a 0.3 to 0.5 percent interest increase when clients create an account through Internet banking, and a 0.3 percent discount in borrowing rates.

It is easier to avoid commission fees if most of your transactions are focused on one bank, and if family members have accounts in the same bank. Woori Financial Affairs Technology Director Kim In-yong says, “As banks give a 20 to 30 percent discount in commission fees to clients with high transaction showings, superior clients can save up to 70 percent in commission fees when using Internet banking.”

Another shortcut towards saving in commission fees is to minimize the number of unnecessary transactions and to use credit cards appropriately.

Hana Bank Financial Affairs Technology Director Hwang Chang-gyu says, “It is wise to draw out money from your main bank in your spare time, since commission fees are high when using other banks’ ATMs outside of business hours,” also adding, “At night, it is more favorable to use credit cards instead of cash.”

Chang-Won Kim Joong-Hyun Park changkim@donga.com sanjuck@donga.com