2 Percent Extra on Debit Card Payments is Unfair, says RBI - Facts

Story:

Shopkeepers and Merchants cant charge 2% extra on Debit Card Payments, Its ILLEGAL – Says RBI.

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Analysis:

The message appears like a notice issued in public interest stating that the 2% extra money which some merchants in India charge the customers while paying through their Credit/Debit card is illegal and unfair, as reported by the Reserve Bank of India (RBI). Yes, it is a fact.

In India some merchants in retail segment like budget jewellery, electronics and grey market outlets (unofficial distribution channels) insist that the customer would have to pay an extra 1-2% of the MRP of the product in case he wants to pay using his credit/debit card. Most people are unaware that this is in fact unfair and illegal. As mentioned in the message, RBI issued a public notice mentioning this unfair practice.

Pernicious practices of select banks deterring customer protection and accounting integrity
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4. Levying fees on debit card transactions by merchants – There are instances where merchant establishments levy fee as a percentage of the transaction value as charges on customers who are making payments for purchase of goods and services through debit cards. Such fee are not justifiable and are not permissible as per the bilateral agreement between the acquiring bank and the merchants and therefore calls for termination of the relationship of the bank with such establishments.

Why do the Merchants Charge Extra on Card

When you are paying through your card, the merchant has to use the swipe machine (issued by banks) to make the payment. To avail this kind of convenient business service, the merchant needs to pay some percentage of transaction (1-2%) as rental fees to the Bank. So instead of paying it from their own pocket, some merchants charge extra on card payments and mislead the customers. In some cases, the merchants discourage this kind of billing with card altogether and prefer cash payment – because cash purchases can be made as unaccounted transactions to avoid taxes.

This overcharging on credit/debit card payments is levied by the merchant and not the bank. Like mentioned by RBI, this is not a fair practice, because the merchants are already in an agreement with the bank of the card swiping machine that they are not going to charge anything extra from the customers. RBI has in fact asked the banks to break their relationship with those merchants who are into such unfair practices. So if you come across any such merchants, you can deny the extra surcharge payment on your credit/debit card. In case of disputes, you can complain to respective bank or RBI.

However, it should be noted that this extra surcharge is applicable for certain services like railway tickets and some petrol pumps.