RBI Guidelines For MDR Charges | Can shopkeeper charge you extra for using credit cards?

[TechnoFino]

This is a common problem. Sometimes a few shopkeepers ask you to pay an extra amount (around 2%) for accepting payments using your credit card.
Can merchants ask you to pay extra for using your credit card?
There is an old internal RBI circular issued to all banks and credit card issuing companies regarding this issue. The RBI has asked all banks to report instances to the RBI every quarter wherein the banks have received complaints against their merchants for charging MDR to the customers.
This can be done by any customer who has availed a service from a merchant and has been charged extra because of MDR.

"In short, any customer who has been charged extra because of MDR can complain directly to the RBI ombudsman, and the ombudsman will take up the matter with the merchant's bank." -RBI Employee.
So now you know what to do if any merchant asks you to pay extra because of MDR.

Edit:
Everyone is focusing on the whether the MDR charged is shown in the invoice or not. But you need to focus on whether the charges are incorporated in the service or the price of product.
For example, if you are purchasing some packaged products from a mall or a shopkeeper, they cannot increase the price of the product since it cannot be more than the MRP of the product.
So here, the merchant will have to show MDR charges in the invoice also or he cannot charge you extra. If he shows, complaint against this to RBI ombudsman.
Lets take another scenario. If u use any services and have been charged by the merchant extra because you paid by your credit card, ask him to gove computerised bill. He will not be able to increase the price of services with the MDR. This is because these prices are feeded into the system earlier and cannot be changed everytime a customer comes for payment through credit card.

Regarding those who are saying nothing will happen, i just want to say it all depends on the amount of people complaining against these charges. MDR charges are to be levied in cases of credit cards, but not to end customer, to the merchant. 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.

 

[SaiyamK]

But what is the process for end customer? Like I went to computer shop and purchased 20K worth of items, now the shopkeeper saying that

credit card +3% extra
debit card +1% extra
Cash - no charges

so what should customer do - pay that extra 3%/1%, get the bill and file for complaint?

Yeah you have to pay some amount extra to be eligible to file a complaint. Just make sure the amount should be 1%/3% more than the invoice so you can prove that you were charged extra by the merchant.

 

[rjsudeep]

I don't think the process is that easy though.

Yeah you have to pay some amount extra to be eligible to file a complaint. Just make sure the amount should be 1%/3% more than the invoice so you can prove that you were charged extra by the merchant.

 

[jainabhishek14]

Also, In those cases Merchant prepares the invoice as per the charged amount only. I have faced this situation where merchant asked for 2.5% extra with a credit card as Credit card companies need their commission. Even though I paid by card but then invoice amount got changed to the one which I paid by card. How can we prove in these cases?

 

[rjsudeep]

Also, In those cases Merchant prepares the invoice as per the charged amount only. I have faced this situation where merchant asked for 2.5% extra with a credit card as Credit card companies need their commission. Even though I paid by card but then invoice amount got changed to the one which I paid by card. How can we prove in these cases?

Yes exactly, they never give the invoice for the charges included. Recently I had paid at a Tata Motors dealer, where they charged extra, but gave the invoice only of the main amount.

 

[Predator]

But what is the process for end customer? Like I went to computer shop and purchased 20K worth of items, now the shopkeeper saying that

credit card +3% extra
debit card +1% extra
Cash - no charges

so what should customer do - pay that extra 3%/1%, get the bill and file for complaint?

I guess one can not complain in such cases because they will generate bill for the amount including MDR charges. one can not differentiate between price of product and MDR amount.

 

[Predator]

Also, In those cases Merchant prepares the invoice as per the charged amount only. I have faced this situation where merchant asked for 2.5% extra with a credit card as Credit card companies need their commission. Even though I paid by card but then invoice amount got changed to the one which I paid by card. How can we prove in these cases?

because many shopkeepers already offer price at a very less margin. Extra MDR is burden on them, so they increase the price of products to keep their profit safe.

 

[SaiyamK]

So, that is the whole point, they also play safe. You would need some kind of evidence to prove that you paid MDR charges. Or wait for Rupay to roll out 0 MDR Charges and UPI. Merchants then would also get aware soon then.

 

[Pavan]

Am the victim of this please can someone help me with process to lodge with RBI

 

[SaiyamK]

Go to this site and complaint given the fact TechnoFino told we can file complaint directly,

https://cms.rbi.org.in/cms/indexpage.html#eng

Keep in mind they will ask for multiple proofs.

 

[Pradeepbansal]

Everyone is focusing on the whether the MDR charged is shown in the invoice or not. But you need to focus on whether the charges are incorporated in the service or the price of product.

For example, if you are purchasing some packaged products from a mall or a shopkeeper, they cannot increase the price of the product since it cannot be more than the MRP of the product. So here, the merchant will have to show MDR charges in the invoice also or he cannot charge you extra. If he shows, complaint against this to RBI ombudsman.

Lets take another scenario. If u use any services and have been charged by the merchant extra because you paid by your credit card, ask him to gove computerised bill. He will not be able to increase the price of services with the MDR. This is because these prices are feeded into the system earlier and cannot be changed everytime a customer comes for payment through credit card.

Regarding those who are saying nothing will happen, i just want to say it all depends on the amount of people complaining against these charges. MDR charges are to be levied in cases of credit cards..but not to end customer, to the merchant.

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 unsrupulous 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. Think about it..

 

[Pavan]

Go to this site and complaint given the fact TechnoFino told we can file complaint directly,

https://cms.rbi.org.in/cms/indexpage.html#eng

Keep in mind they will ask for multiple proofs.

I have original GST bill where merchant has deducted 2% and for example i transfered 20K through GPAY he gave bill for 19,200 (deducting 2%) he said he got only 19,200 from bank

 

[SaiyamK]

I have original GST bill where merchant has deducted 2% and for example i transfered 20K through GPAY he gave bill for 19,200 (deducting 2%) he said he got only 19,200 from bank

That would be enough in my opinion. Hope for the best!

 

[TheMentalist]

So, that is the whole point, they also play safe. You would need some kind of evidence to prove that you paid MDR charges. Or wait for Rupay to roll out 0 MDR Charges and UPI. Merchants then would also get aware soon then.

Rupay already has 0 MDR charges, which is the main problem that it's acceptance by Shopkeepers/Banks is low compared to Visa/MC

 

[AsB]

Some of the merchants add this charge to the discount that they were otherwise offering in the product.
Example - if an AC costs 41k , and the shopkeeper (somehow) knows that you would be paying through Credit Card , then they add 2%, i.e Rs 41,800 .

 

[SunnyM]

Some of the merchants add this charge to the discount that they were otherwise offering in the product.
Example - if an AC costs 41k , and the shopkeeper (somehow) knows that you would be paying through Credit Card , then they add 2%, i.e Rs 41,800 .

What is the amount mentioned on the invoice in this case ?

 

[AsB]

What is the amount mentioned on the invoice in this case ?

41800

 

[AsB]

What is the amount mentioned on the invoice in this case ?

But, I think that's partially fair

 

[thanix]

I have original GST bill where merchant has deducted 2% and for example i transfered 20K through GPAY he gave bill for 19,200 (deducting 2%) he said he got only 19,200 from bank

Isn't Gpay primarily used for UPI? In that case, entire money hits merchant bank account. Or you have used linked card for Bharat QR scan? Or is it tap and pay?

 

[Pavan]

Isn't Gpay primarily used for UPI? In that case, entire money hits merchant bank account. Or you have used linked card for Bharat QR scan? Or is it tap and pay?

No through GPAY we have MDR charges