Credit card issuers in South Korea have stopped charging customers cash-advance handling fees, a spokesperson for the Credit Finance Association of Korea confirms to PaymentsSource.
Historically, the country’s card issuers have charged cardholders handling fees ranging from 0.2% to 0.6% of the amount advanced on their credit cards, plus the interest on the card loans. The typical annual interest rate on cash advances is about 4%, according to the Credit Finance Association.
Most issuers have stopped charging the handling fee. “The last issuer to do so was Nong-Hyup, Korea’s federation of agricultural cooperatives, which did so last week,” the spokesperson says.
Card issuers first introduced the handling fee in 2003 to protect against losses when the country’s collective credit card debt topped US$100 million and the government had to bail out the country’s largest issuer, LG Card.
The system first showed signs of being abolished in March last year, when several issuers, including Hana Card Co Ltd., BC Card Co Ltd., SC First Bank Ltd., Industrial Bank of Korea Ltd. and Shinhan Bank Ltd., began lowering their cash-advance fees or eliminating them altogether (
Their actions followed a statement that month from the Financial Trade Commission that the fees were unfairly high for cardholders and that it was unfair for them to pay one fee to use the service and another to cover the interest expense on the loan.
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