Did you know that you can file a complaint with the RBI if a merchant charges you MDR fees for using a credit card?

[gurbina]

Just like traffic laws, it seems to be more of a suggestion.

And just like traffic laws, there will be no consequences.

I can't remember the amount of things I report a bazillion times, regardless of the severity and no action is taken.

Everyone seems to be blatantly flaunting the law/guidelines/ToS, even here in the forum daily you'll see such posts daily.

Until this is enforced by the government (as it is for the convenience of the consumers, banks have nothing to gain except lose or be at competitive disadvantage), nothing will be done.

But worldwide this is the case, these fees cannot be passed onto consumers.

 

[jack333]

If online portals are openly looting by masking the extra charges as convenience fees or gateway charges, why won't the offline shopkeepers do the same

 

[gurbina]

If online portals are openly looting by masking the extra charges as convenience fees or gateway charges, why won't the offline shopkeepers do the same

This is the mindset that has lead us into this.

Online or offline, these charges exist.

Now the problem lies here: most of merchants are using third party payment providers for their website. They do not develop or maintain such systems.

How do you think these private payment gateways make money? They still have to pay that MDR when processing card transactions and on top of that they have to maintain their systems and staff. That's their business, just like PayPal or anyone else, they facilitate a payments platform solution so merchants don't have to deal with any of nuisances of handling transactions themselves.

As for the merchants passing those fees onto customers when using a credit card terminal, what have they done or have to maintain? Nothing. Usually PoS/card terminals are issued at no cost, minimal cost, or on contractual terms (ie amount of money transacted).

What do these merchants gain? People will have higher spending power and will be less hesitant to purchase more or buy on EMI.

If someone is so pity to try to pass on those fees, take your business elsewhere.

There's no other solution, us as consumers have the power to change this as well.
Do not condone this type of behavior if you want to see change, let them know your mind and if they won't budge, screw them. There's plenty of other businesses out there.

 

[bugmenot]

Well you are paying entirely by card including 2% extra saying I don't have cash at all so of course it will show up in card, you will have invoice of less than the amount deducted from the card.

You mean to say I should give invoice having actual amount of product/service and credit card statement which mentions amount including extra charge. Is it considered as valid evidence? Can someone confirm this who raised an escalation to RBI?

@TechnoFino

 

[panchabhut]

please read the whole para 9.3.

that means rbi is not managing min and maximum MDR just like they do in the case of debit card.

Can you please indicate the specific RBI notification which bans the shifting of MDR to customers by the merchants

 

[RaviAgl]

Yes, it is illegal to collect extra charges on credit cards.

I myself am an electronics goods dealer and we do bear card charges. We typically hate Commercial cards (Hdfc Business, Diners, etc.). The Bank charges an MDR of 2.75% +18% gst on them.

However, ours is a highly competitive business suffering from both online, distribution and big mall (such as Vijay Sales, Tata Croma, Reliance, etc) channels. So, profit margins are abysmally low.

Now, owing to a high ticket size say anywhere around 30k-100k and operating on an approximately 4-5% gross profit, bearing the MDR charges becomes quite challenging. Now, we have to sell our goods, so if someone comes with a credit card and challenges us, then we do bite the bullet and make the sale, just as not to lose a customer.

So, generally we ask the customer to take out money from his ATM, if he is using a debit card. Or we may use UPI which is pretty common.

In case of a dead smart customer who keeps on arguing, we have the option of not charging him/her the extra 2%. But, the catch is that, we have to do the transaction in a BrandEMI mode (in the Point of Sale terminal) to give the customer the benefit of cashback and when we do the transaction in normal mode, s/he will not get cashback. In order to ditch such people we can do the transactions in normal mode and then let them go and fight their ass off with the Credit Card Helpdesk. But, we have not done anything like this, till date. Our heart does not allow.

In case of Credit Card, generally there are discount and cashback offers running from the various brands. Before maturing the sale, just suppose that there is an offer of 15%, then we say to the customer that you will get a benefit of 13% if you use your card and the product after deducting cashback will cost you that amount. Generally, customers are happy and don't argue with us then.

Just in case, suppose we do markup the value in Credit Card payment, it is made sure that the customer gets an invoice of the amount actually charged including charges, so that s/he may not raise a dispute with the Credit Card issuing Bank.

So, yes it is a tough fight, but guess that's the way it is.

Thanks for reading,
Ravi.

 

[anilkrsh]

Yes, it is illegal to collect extra charges on credit cards.

I myself am an electronics goods dealer and we do bear card charges. We typically hate Commercial cards (Hdfc Business, Diners, etc.). The Bank charges an MDR of 2.75% +18% gst on them.

However, ours is a highly competitive business suffering from both online, distribution and big mall (such as Vijay Sales, Tata Croma, Reliance, etc) channels. So, profit margins are abysmally low.

Now, owing to a high ticket size say anywhere around 30k-100k and operating on an approximately 4-5% gross profit, bearing the MDR charges becomes quite challenging. Now, we have to sell our goods, so if someone comes with a credit card and challenges us, then we do bite the bullet and make the sale, just as not to lose a customer.

So, generally we ask the customer to take out money from his ATM, if he is using a debit card. Or we may use UPI which is pretty common.

In case of a dead smart customer who keeps on arguing, we have the option of not charging him/her the extra 2%. But, the catch is that, we have to do the transaction in a BrandEMI mode (in the Point of Sale terminal) to give the customer the benefit of cashback and when we do the transaction in normal mode, s/he will not get cashback. In order to ditch such people we can do the transactions in normal mode and then let them go and fight their ass off with the Credit Card Helpdesk. But, we have not done anything like this, till date. Our heart does not allow.

In case of Credit Card, generally there are discount and cashback offers running from the various brands. Before maturing the sale, just suppose that there is an offer of 15%, then we say to the customer that you will get a benefit of 13% if you use your card and the product after deducting cashback will cost you that amount. Generally, customers are happy and don't argue with us then.

Just in case, suppose we do markup the value in Credit Card payment, it is made sure that the customer gets an invoice of the amount actually charged including charges, so that s/he may not raise a dispute with the Credit Card issuing Bank.

So, yes it is a tough fight, but guess that's the way it is.

Thanks for reading,
Ravi.

Just out of curiosity, i know merchants hate amex and diners for high mdr, but what about premium cards like magnus, Infinia and aurun? Do they have higher mdr than normal cards?

 

[TheMentalist]

Did you know that if a merchant charges you MDR fees for using a credit card, which is supposed to be paid by the merchant, you can file a complaint with the RBI banking ombudsman?
This is in line with the RBI and bank policy that requires merchants to pay MDR fees for accepting credit card payments and prohibits them from passing these fees onto customers. If a merchant does pass on MDR fees to you, then you can first approach the POS terminal issuing bank for assistance. If the bank is unable to help, you can then file a complaint with the RBI banking ombudsman.




Here's a real-life example of this issue.
A few months ago, I went to a local pharmacy and requested to pay with my credit card. However, the store manager informed me that if I wanted to use my credit card, I would have to pay an extra 2% fee. Have you ever wondered why merchants ask for these additional fees for credit card payments? This is because banks charge merchants a fee of 1% to 4% (depending on the business category) for accepting credit cards, which is known as the Merchant Discount Rate (MDR). However, according to the RBI and the POS machine issuing bank, this fee should be absorbed by the merchant and not passed on to customers.

How to file a complaint with the RBI banking ombudsman [full guide] - https://www.technofino.in/community...ank-on-the-rbi-banking-ombudsman-portal.3130/

Jaankar Baniye, Bank Se Satark Rahiye...

Looks like the result of your earlier thread @TechnoFino : https://www.technofino.in/community...charge-you-extra-for-using-credit-cards.2695/

When so many people complaint against these charges, and if ombudsman has no idea on how to deal with these cases, they will be referred as feedback and suggestions to higher authorities in RBI to streamline processes related to these unscrupulous activities by certain merchants.
As on date, a very few complaints regarding this are received in ombudsman offices throughout the year. So no one in RBI is also bothered about it.

 

[RaviAgl]

Just out of curiosity, i know merchants hate amex and diners for high mdr, but what about premium cards like magnus, Infinia and aurun? Do they have higher mdr than normal cards?

Credit Cards are divided into 3 -types

Normal, Commercial, and Amex.

Generally, normal cards are charged at a flat rate decided between the merchant and bank. It may range anywhere between 0%-2.25% Depends a lot on the transaction volumes and ticket size. If you are doing transactions of around 10 Cr per year, you may get a rate of 1% or lower.

Commercial cards are fixed @ 2.75% MDR, Generally prepaid gift cards also fall in this category. Diners, International (forex currency) cards & Hdfc cards including "Business" in Card name fall into these. Cobranded cards issued by big companies which include Ltd in their name may also fall into the commercial cards category (did encounter a few such cards such as those of RSWM Ltd and BSL Ltd from SBI and these cards are not included in the cashback schemes at our stores). ICICI bank has excluded Amazon Pay Cards in all its cashback schemes, so Amazon Pay Cards are also losing a lot of their value at offline stores.

Amex are a different line altogether and need to be activated separately by the merchant by getting in touch with the Amex Team. I have been doing transactions since the past 10 years or so, but recently came to know of it. Got the Amex cards activated after a lot of hassle at my place. They have an MDR of around 2%. Very few merchants know that Amex needs to be activated separately on the Point of Sale terminal.

That is all I know. Feel free to correct me at places I may have missed.

Thanks.

 

[anilkrsh]

Credit Cards are divided into 3 -types

Normal, Commercial, and Amex.

Generally, normal cards are charged at a flat rate decided between the merchant and bank. It may range anywhere between 0%-2.25% Depends a lot on the transaction volumes and ticket size. If you are doing transactions of around 10 Cr per year, you may get a rate of 1% or lower.

Commercial cards are fixed @ 2.75% MDR, Generally prepaid gift cards also fall in this category. Diners, International (forex currency) cards & Hdfc cards including "Business" in Card name fall into these. Cobranded cards issued by big companies which include Ltd in their name may also fall into the commercial cards category (did encounter a few such cards such as those of RSWM Ltd and BSL Ltd from SBI and these cards are not included in the cashback schemes at our stores). ICICI bank has excluded Amazon Pay Cards in all its cashback schemes, so Amazon Pay Cards are also losing a lot of their value at offline stores.

Amex are a different line altogether and need to be activated separately by the merchant by getting in touch with the Amex Team. I have been doing transactions since the past 10 years or so, but recently came to know of it. Got the Amex cards activated after a lot of hassle at my place. They have an MDR of around 2%. Very few merchants know that Amex needs to be activated separately on the Point of Sale terminal.

That is all I know. Feel free to correct me at places I may have missed.

Thanks.

Thank you so much and this was very insightful. I have worked in Card analytics but i always had to look at things from bank's point of view.

 

[iNokia]

From what I know, RBI forbids this for debit cards but not credit cards. RBI is working on a similar rule for credit cards but it will take time. So you can use this form if you used debit card.

 

[Harry1]

Online I saw someone mentioned that it is legal to take extra surcharge for MDR, as long as they are registered under that category of merchant.

 

[RaviAgl]

Online I saw someone mentioned that it is legal to take extra surcharge for MDR, as long as they are registered under that category of merchant.

Maybe, but that could be a totally different category, such as government institutions or some big company operating its own payment gateway.

We can say that this rule (where you cannot charge the customer) is generally applicable for retail stores entering into agreement with banks supplying the point of sale terminals.

Moreover, there are other guidelines too, such as the Merchant must not swipe his own cards, must not swipe card and pay cash to customer and only operate the terminal for sale of merchandise and so on.

Thanks,

 

[Harry1]

Maybe, but that could be a totally different category, such as government institutions or some big company operating its own payment gateway.

We can say that this rule (where you cannot charge the customer) is generally applicable for retail stores entering into agreement with banks supplying the point of sale terminals.

Moreover, there are other guidelines too, such as the Merchant must not swipe his own cards, must not swipe card and pay cash to customer and only operate the terminal for sale of merchandise and so on.

Thanks,

Some pretty common things are car or bike purchases. Almost everyone take 2% extra there.

 

[Rohit75]

I have ICICI POS.
MDR is 1.25% for all visa platinum, 1.75% for all signature and lasty 2.25% to 3% for Commercials and Amex. These attracts 18% GST also.

 

[AllSeeker]

Here is the real reason why merchants like to scare away ppl using cc by charging them MDR.

That way they avoid doing a legally taxable transaction, what they will do is have some savings account behind the UPI code or cash is basically anything goes.

MDR is nothing much for merchants, real intention is to make sure you don't transact using CC or debit which would be on record, by default even if you do not take any real bill, because the transaction receipt from pos will be bill itself. This is different from someone sending money via UPI which has savings account behind it.

I've mentioned before somewhere else, most electronics goods merchants in my area rotate dozens of credit cards sometimes, where they pocket anywhere from 5%-30% based on card variant and offer. Clearly, if MDR mattered that much, they wouldn't do it.

In fact at most stores, MDR is negotiated, some times banks even give extra benefits.


Also, yes, this MDR is always supposed to be paid by merchants, not end users, but good luck getting that done.

I'm down for making list of such merchants and filling complaint against them in masses in RBI.

 

[harshit_agrawal]

Yes, it is illegal to collect extra charges on credit cards.

I myself am an electronics goods dealer and we do bear card charges. We typically hate Commercial cards (Hdfc Business, Diners, etc.). The Bank charges an MDR of 2.75% +18% gst on them.

However, ours is a highly competitive business suffering from both online, distribution and big mall (such as Vijay Sales, Tata Croma, Reliance, etc) channels. So, profit margins are abysmally low.

Now, owing to a high ticket size say anywhere around 30k-100k and operating on an approximately 4-5% gross profit, bearing the MDR charges becomes quite challenging. Now, we have to sell our goods, so if someone comes with a credit card and challenges us, then we do bite the bullet and make the sale, just as not to lose a customer.

So, generally we ask the customer to take out money from his ATM, if he is using a debit card. Or we may use UPI which is pretty common.

In case of a dead smart customer who keeps on arguing, we have the option of not charging him/her the extra 2%. But, the catch is that, we have to do the transaction in a BrandEMI mode (in the Point of Sale terminal) to give the customer the benefit of cashback and when we do the transaction in normal mode, s/he will not get cashback. In order to ditch such people we can do the transactions in normal mode and then let them go and fight their ass off with the Credit Card Helpdesk. But, we have not done anything like this, till date. Our heart does not allow.

In case of Credit Card, generally there are discount and cashback offers running from the various brands. Before maturing the sale, just suppose that there is an offer of 15%, then we say to the customer that you will get a benefit of 13% if you use your card and the product after deducting cashback will cost you that amount. Generally, customers are happy and don't argue with us then.

Just in case, suppose we do markup the value in Credit Card payment, it is made sure that the customer gets an invoice of the amount actually charged including charges, so that s/he may not raise a dispute with the Credit Card issuing Bank.

So, yes it is a tough fight, but guess that's the way it is.

Thanks for reading,
Ravi.

Can you please tell the process of exactly availing the cashback schemes of brand EMI that are going on. As I have seen many merchants act like they don't know the offer or they just don't want to give the benefit to customers. Like in POS machine how to process these EMI offers of different brands.

 

[blacktiger]

can u clarify this if he gives bill on the actual product with price including +2%. Because earlier it used to be that merchants charge extra and mention in bill as service charge. but today, theyre just increasing the price of product that includes this charge. i have seen a number of merchants that discount this 1-2% if paid using upi. does this violate rbi rule?

 

[RaviAgl]

Can you please tell the process of exactly availing the cashback schemes of brand EMI that are going on. As I have seen many merchants act like they don't know the offer or they just don't want to give the benefit to customers. Like in POS machine how to process these EMI offers of different brands.

Generally it is a menu driven process. In order to process cashback benefits, the merchant has to get the brand mapped to his terminal beforehand.

Then he has to select the brand from available menu options which may drill down to subcategories and then the final product. After that, you input the serial number or Imei number and the emi tenure.

After a successful transaction, the chargeslip which comes out contains all details of the transaction.

The process may differ from brand to brand.

Thanks,

 

[RaviAgl]

can u clarify this if he gives bill on the actual product with price including +2%. Because earlier it used to be that merchants charge extra and mention in bill as service charge. but today, theyre just increasing the price of product that includes this charge. i have seen a number of merchants that discount this 1-2% if paid using upi. does this violate rbi rule?

If one marks up the invoice value to include transaction charges and the product is sold below or at MRP, then I think it would not be a problem for the merchant from a legal point of view.

But, that is not good business ethics.

Other than that addition of surcharge is illegal and maybe challenged in court.