U.S.-based Costco Wholesale Corp. may change its “one-credit card use” policy in Korea due to the revised law on credit card service fees.
The large discount chain operates businesses in eight countries ― the U.S., Canada, Mexico, Australia, Japan, Taiwan, the U.K. and South Korea.
Costco has signed contracts with “one credit card firm per country.” For example, consumers are allowed to pay for goods only with American Express in North America and only with Samsung Card in Korea.
Under exclusive deals with a single credit card issuer, the U.S. company can minimize the payment of settlement service fees to the credit card sector in Korea and the seven other countries. Its service-fee payment level is the lowest in Korea.
Its next policy, however, is broadening interest among retailers and credit card holders, as Costco has also been urged to raise the service-fee payment ratio to about 1.7 percent of its sales, from the current 0.7 percent.
Over the past few years, a large number of small retailers had to pay around 2 percent of their sales to credit card firms.
Financial regulators recently instructed the big retailer to pay higher service fees to credit card firms and reduce the burden on smaller retailers.
Costco and Samsung Card have been in negotiations on maintaining the exclusive contract.
A feasible scenario is that Samsung will pay a penalty for a breach of contract to Costco on condition of continuation of the deal.
Some market observers said the cancellation charge could surpass 10 billion won ($9.3 million). However, the hike in service fees was initiated by the Financial Supervisory Service, not by Samsung Card.
Costco may choose to break the contract to attract consumers with other issuers’ credit cards.
Costco Wholesale Korea, which operates nine branches nationwide, plans to open branches in Yongin, Gyeonggi Province, and Cheonan, South Chungcheong Province.
About a year ago, about 2 million retailers nationwide threatened to boycott consumers’ payments via Samsung Card.
They demanded the nation’s third-largest credit card issuer cut settlement service charges on retailers and cease offering exclusive benefits to Costco.
By Kim Yon-se (
kys@heraldcorp.com)
