Korean Base Rate Raised to 3.25% - Credit Card Companies Also on Notice.

The Bank of Korea raised it's base rate 25 basis points to 3.25% on June 10th (sorry it's late).

Of more concern to the Korean economy is the Financial Supervisory Services notification to credit card companies that they want them to curtail their debt issuance and marketing expenses.  The FSC is threatening weekly inspections and bans on new card issuance should the companies not comply.  Korean household debt is running at high levels.  Hopefully everyone in Korea has learned from the last credit card crisis.

Internet Banking in Korea

Due to the absence of personal cheques and the former maximum won note being w10,000 (approximately USD$9.34 on May 3rd at 1.34pm) Internet Banking is a very popular way to pay bills and manage money in Korea.

With Internet Banking it is possible to instantly transfer money to anyones account in Korea, it is also possible to send money abroad, open new accounts, and review your transaction history depending on your bank and their policies.

To get Internet Banking you will need to visit a bank branch and register for Internet Banking not all banks offer English Internet Banking so if you don't know Korean, you will need to change banks.  If they tell you can't have Internet Banking  for 3 months you can call the bank's English helpline, or just leave and find another bank or branch that has adequately trained their employees.

When you have registered you will need to log in and download a certificate onto your computer.  Many banks tend to only operate on Internet Explorer and Windows, although this is changing Mac users probably won't be able to use Internet Banking.
Once you have a certificate you can use it with other banks as well provided that you have registered with them for Internet Banking.  The certificate will also allow you to logon to the National Pension Office, the National Tax Service and many other useful webistes, so guard your certificate and password carefully.

If yoiu have registered that your bank is your primary foreign exchange bank you will also be able to complete overseas trnsfers from the comfort of your own home.  This can be useful for people that find visiting a branch difficult although you will need to visit a branch at least once.

Banking Scams

Living in Korea is very safe and this safety can lead to a sense of complacency. Financial fraud through scams is a problem and here I will warn of some of the most common and how to avoid them. The Korean Police take scams very seriously, however as in all countries recovery rates are low.

The 2 Bankbook Scam

Your employer will ask you to open a separate bank account and get an ATM card and give it to them with the PIN. They may even tell you this is normal in Korea. It is not, it is illegal. This scam is popular with some recruiters and companies because they get payments paid into your bank account and then withdraw cash to pay you and themselves tax free. They get tax free money because you are liable for the tax on the whole amount. This violates the real name transaction laws in Korea, and leaves you personally liable to large tax bills. Do not ever give anyone your bankbook, card and PIN.

The Cheap Good Online in a Remote Part of the Country

A cheaper than normal good is advertised online. You reply to the ad and they negotiate a deal where if you transfer money to their bank account, they will ship the good to you from the remote part of the country. You transfer your money and then wait but the good never arrives. The best way around this is to either get on a bus and go and meet the person or only pay COD which can be arranged by courier companies.

Voice Phishing

You get a phone call telling you to pay money into a bank account. The caller may present themselves as a banker, a public servant, or a kidnapper. They may even tell you it's to avoid being robbed. Do not transfer money to people whom you don't know. Banks can freeze an account that is at risk, they don't need you to transfer money to another account.

Internet Phishing

Your bank sends an email asking you to click a link to confirm your details including name and password. Do not click the link. Banks do not send emails asking for security details.

Card Skimming

This can be done at an ATM or by a merchant at POS. Your card is read and recorded on a separate device and a concealed video camera records your PIN. Never use an ATM that has a strange looking card reader, and hide the keypad under your hand, bankbook or wallet when entering your PIN.  Also remember that debit(check) and credit cards can be used without a signature or with minimal checking of the signature, do not have your life savings in a checkcard account and do not carry too many credit cards.

Letter, Email Scams

Hello, I don't know you and I want to give you half of $10 million dollars. We have all seen these emails, the writer wants to empty a large unclaimed bank account but of all the people in the world they want you to help them. Either that or “congratulations”, you have won a lottery you never entered. These emails have 2 purposes to either gain all of your personal information to commit identity fraud or should you wish to proceed, they will ask for money to help cover costs incurred in recovering the money. Do not respond to these emails, living abroad we are particularly vulnerable to identity fraud in our home countries.

Identity Fraud

By gaining personal information about you, fraudsters will either empty your bank accounts, or apply for credit in your name, which they will never repay. Be careful who you give your details to, including passport, drivers license, ID number, bank and workplace.

Have you been a victim of any of these scams or can you add to this article? Write to koreanbankingblog@gmail.com

A Good Day to Finish Early

Well it's Thursday.  Many years ago I was advised by a very senior public servant in Australia that Thursday is a good day to finish at lunchtime and go to play golf.  His rationale was that if then stayed in your office until 6.30pm on Friday night,  everyone would think you were a hard worker.

Unfortunately that doesn't work for me in Korea.

I haven't written for the blog today, but I did write to FN Hub Korea to clarify the policy for international residents to remit money home and hold international access cards.  I hope to get a response next week to share with you.

I hope that you are now on the golf course, or at least the 19th hole.

International Transfer Rules for International Residents in Korea

Several years ago, I wanted to transfer a couple of hundred dollars home to pay some small bills.  I went to the local bank where the teller told me that it would be impossible without bringing proof of income, he then proceeded to show me what the proof should look like by producing an income statement that another customer had provided, the punchline was I knew the customer although I hadn't previously  known his income.

Why is it so hard to transfer money home?

1. In Korea there was a cultural aversion to importing.  Until 1986 foreign cars and cigarettes were illegal.  If you work in Korea and send the money home, your service is an export from your home country, older people may think this is wrong, although if you look at the young, this has changed fast;
2. Like many currencies in the world the Korean Won is subject to exchange controls;
3. A complicated legal and regulatory framework;

The easiest thing to do is take your passport, ARC, proof of employment and housing to the bank when you open the account, register this bank as your primary foreign exchange bank and register for online transactions, then you can transfer money home by ATM or Internet Banking.  If you do this you can transfer, spend or withdraw a total of US $50,000 a year.

This process is cumbersome, anti-competitive and unnecessary but it is the rule.

Getting a Mortgage in Korea

I have limited experience in this area and so details will be sketchy at best.  There is no rule saying that you must be Korean to get a mortgage.  But in any country getting a mortgage is a lengthy and difficult process and just look to the US if you want to see why this is a good thing.

In Korea generally your first mortgage will be a 3 year interest only deal, in 3 years time, you will need to refinance.  Korean banks will loan a maximum of 60% of the banks value for the property or 60% of the sale price whichever is lower.  Many Koreans will take out extra loans to reach the 40% cash threshold, but that won't be an option for most international customers nor a very good idea.

If you have the 40%+ difference in value+real estate fees+legal fees+taxes you then can apply for a mortgage.  I have only met 2 international residents who have successfully gotten a mortgage.  Under Korean law generally, you cannot be refused because you aren't Korean.  One permanent resident did successfully win a case in the National Human Rights Commission after a mortgage insurer refused to cover him due to being "foreign".

I have heard of an E2 visa holder (language teachers visa) who received a mortgage but I don't personally know this person.

In theory it is possible, my bank said to me you can get a mortgage in your name but it would be much easier for you and us if you did it in your (Korean) wifes name.

I will update this entry as more information comes to hand.

If you have any information please write to koreanbankingblog@gmail.com 

Why banking in Korea is better than your home country.

In Korea the mantra is quick, quick.  This applies to everything, including banking.

I once had cause to email a bank V.P. on a Monday after being refused a checkcard, and by 2pm Wednesday the bank's policy had changed.  In another instance, an acquaintance had a problem with a bank regarding getting an ATM card, 2 days later the bank clarified the policy.  Korean banks are rising to the challenge of becoming more sensitive to the needs of international customers and will be successful to put Korea onto the global financial map.

Another good thing in Korea is that banks here are yet to discover the joys of fee revenue.  If you are Australian, you are well aware of banks gouging excessive fees for diminishing services. In Korea the only fees that affect most international customers are, ATM withdrawal fees, and transfer fees.  There are even accounts that waive these fees.  If you don't have sufficient funds for a direct debit, there is no fee charged to you.  If you visit a branch there is no fee to you.  If you are late paying a credit card there is no fee to you, other than interest.  I almost believe that Koreans wouldn't pay extra fees and introducing them would be huge a first mover disadvantage.  Korean banks are in fact innovating to introduce new fees.  If you want an SMS every time there is a transaction on your account pay w1,000 per month seems very reasonable.  If Korean banks can lift their fee revenue by innovation, they will be serving their customers and earning the extra income.

I was talking to a bank in Seoul once about a project that unfortunately didn't get off the ground, and I mentioned that many international company expats were paid offshore, later I saw that bank had developed a local account for these people that could be linked to the offshore account, I am sure it was a coincidence, but it shows the innovation of Korean banks.

I know I have an easier time banking in Korea than expats in many other countries and better than in my home country and if this customer service commitment and innovation could reach the branch level, Korea could be number 1 in the world for retail banking.