[Ki Ha-young's Life Card] If Your Overseas Direct Purchase Payment Is Higher... Check 'This'

Overseas KRW Payment Service Incurs 3-8% Additional Fees
From Next Month, New Card Applicants Must Choose Whether to Use 'Blocking Service'

Is there anyone these days without at least one credit card? In modern society, anyone can have a card if they want. Credit cards have brought unparalleled convenience to daily life. Now, wherever you go, you can easily see people paying with credit cards or smartphones. As demand has increased, cards with various benefits are being released almost daily. Accordingly, Asia Economy delivers various stories related to cards, which are inseparable from our consumer life, through the weekly 'Cards in Daily Life' corner, from introducing new cards to industry behind-the-scenes and guides for card beginners.

[Source=Yonhap News]

#. Mr. A, an office worker who tried overseas direct purchase for the first time, was surprised when he saw his credit card statement last month. He paid in Korean won, the home currency, as set on the initial screen of the overseas shopping site, but the amount charged was much higher than expected. This happened because he did not know that when paying in Korean won instead of the local currency at overseas merchants, an additional fee of 3-8% is charged.

From the 1st of next month, guidance on the 'Card Overseas Korean Won Payment Blocking Service' will be strengthened to prevent unwanted overseas Korean won payment fees. Whenever a new credit or check card that can be used overseas is issued, the card company will inform the customer about the fees incurred when paying in Korean won overseas. Also, whether to use the overseas Korean won payment blocking service must be mandatorily selected on the application form.

Overseas Korean Won Payment Service, 3-8% Additional Fee Burden

The overseas Korean won payment service (DCC) is a service provided by overseas DCC specialized companies that allows payment in Korean won instead of the local currency at overseas merchants. Consumers can roughly check the payment amount in advance, but must bear an additional fee of about 3-8%. In particular, even if consumers are aware of the additional fee, it has been pointed out as a problem that due to language barriers, they are inevitably placed in situations where they have to pay the extra fee.

When making overseas direct purchases and paying in local currency, the process goes as follows: 'payment in local currency → conversion to US dollars and billing to global brand card companies (Visa, Master, etc.) → domestic card company converts to Korean won and bills the member.' When paying in Korean won, an additional step occurs before payment where Korean won is converted to the local currency, resulting in one more foreign exchange fee. This structure pays a fee on the payment amount for the convenience of displaying the amount in Korean won.

Only 1.3% Apply for Overseas Korean Won Payment Blocking Service

In fact, the card industry has been informing consumers that additional fees may occur when paying in Korean won overseas to prevent consumers from bearing unwanted overseas Korean won payment fees when using cards abroad. In particular, the 'overseas Korean won payment blocking service' was introduced to reject credit or check card approvals when payment is made in Korean won at overseas merchants.

However, the number of consumers actually using the overseas Korean won payment blocking service is minimal. According to the Financial Supervisory Service, as of the end of last year, among 96.1 million members holding credit or check cards usable overseas, only about 1.3% (1.2 million members) had applied for the blocking service. While the proportion of Korean won payments in overseas card transactions last year approached 40% (by number of transactions), very few consumers used the overseas Korean won payment blocking service.

Mandatory Selection of Blocking Service Use from July

Accordingly, the Financial Supervisory Service, together with the Credit Finance Association, has prepared measures to strengthen guidance on the overseas Korean won payment blocking service. From July 1, when applying for new credit or check cards, customers will be informed by the card company about fees incurred when paying in Korean won overseas, and must mandatorily select whether to use the blocking service on the application form. However, reissuance will be implemented from January 1 next year, considering the card companies' system development schedules.

Also, for existing customers who frequently use overseas transactions, information related to overseas Korean won payments will be sent via text messages before the summer vacation season and the Lunar New Year and Chuseok holidays. This year, since overseas usage is expected to be low due to COVID-19, messages will not be sent, but guidance will be strengthened next year. Text messages will only be sent to specific consumers who have overseas card transactions.

This content was produced with the assistance of AI translation services.