Beginning on May 1, several banks will apply a 1% fee to utility payments made with credit cards.
A few banks that are putting the fee increase into effect are Yes Bank and IDFC FIRST Bank.
Banks To Apply 1% Fee To Utility Payments Through Credit Cards
Rent payments made using credit cards and utility bill payments are also subject to the fee.
Customers of IDFC First Bank have a limit of Rs 20,000, whereas those of Yes Bank have a free usage limit of Rs 15, 000.
Only when utility bill payments surpass the designated free usage limit will charges be applied.
‘Private’ credit cards from YES Bank are not subject to the fee adjustments. The charge modifications pertain to figuring out the expenditure criteria that waive membership and annual fees. During a statement cycle, YES Bank will charge 1% for all utility transactions.
In addition to GST, IDFC First Bank will add a 1% tax to utility bill payments over Rs 20,000.
The IDFC First Bank premium does not apply to some credit card kinds, such as the FIRST Private Credit Card and the LIC Classic Credit Card.
Reasons For Increased Charges
The lower Merchant Discount Rate (MDR) and possible misuse of personal credit cards for business expenses are the two key issues that the surcharge and fee increase seek to solve. Utility bill payments typically have lower MDRs than other categories, which has an effect on banks’ credit card revenue.
High rewards on personal credit cards may become difficult to maintain if businesses misuse personal credit cards to pay for utilities. The increase in fees acts as a disincentive to using personal credit cards for large, unapproved corporate expenses.
For the most part, personal credit cards come with greater perks than business credit cards, which makes things more difficult for banks. Utility expenses might reach lakhs for enterprises, although they often fall between Rs 10,000 and Rs 15,000 for households.
Because personal and company credit card reward schemes differ, banks find it difficult to offer large rewards on business transactions. The purpose of additional fees is to help banks meet their revenue problems while preserving the viability of credit card incentive programs.
These fees are being implemented by banks in an effort to create a balance between providing alluring rewards and guaranteeing prudent credit card use. The charge adjustments are a reflection of the banks’ attempts to stay profitable in the credit card industry while responding to shifting market conditions.
