Credit Card Fees Continue to Rise

An office worker, Lee, 33, wishes these days he could stop using the cash advance service on his credit card. He has a bad credit record due to a few late payments and because of this, he is paying a 30-percent APR for his cash advance fee. For example, he has to pay 300,000 won in yearly interest if he borrows 1 million won.

Lee said, “It is still better than using high-interest loans from loan companies. But I am worried, because the fee can be raised again any time.”

As credit card companies and banks continue to raise various fees, customer dissatisfaction has grown. But the financial companies say they have to raise their fees still higher according to the market principle.

--Financial Industry Competing To Raise Fees

According to a report the Credit Finance Association issued yesterday, eight out of nine credit card companies (including three bank credit cards) charge a top rate of 30% APR or more as of late July. BC card was the exception.

Credit card companies, when they lend money to a client, charge a transaction fee in addition to interest on the loan. They started to charge this fee last year, and they raised it this year. This is a major cause of rising fees. The Uri Card increased its fee last month to 0.5 percent from 0.4 percent, and another four cards, including Samsung and Shinhan, raised their fees as well. Card companies are also experiencing complications with their affiliates, including large discount stores, about raising their affiliate fees.

Banks are also steadily raising their fees this year.

The Korea First Bank and the Industrial Bank of Korea increased their fees this month, including their Internet banking fees and personal check fees. The Kookmin Bank plans to raise their fees, including their service fee at the window and Internet banking fee, after September.

--Easy Way or Market Principle?

Kim, 45, who lives in Nam-gu, Incheon, pointed out that “financial companies are transferring the losses caused by their incompetent business management to customers.”

Banks are being criticized by customers for raising fees despite recording their largest-ever profit in the first half of this year.

Concerning this, financial companies are emphasizing the “market principle.”

Hong Kyong-pyo, a manager at the Samsung Card, said, “The transaction fee was added to reflect the heightened risk of overdue payments due to lowered household credit records. Having to raise affiliate fees is also inevitable, because the fees are currently too low compared with the original cost.”

Hong Seok-chul, team leader for Retail Goods at the Kookmin Bank, insisted that “bank fees are one-third of the original cost, and some fees are not even 10 percent of the expense.”

Suk-Ho Shin kyle@donga.com