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Old 16th August 2008, 10:55   #1
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Default Credit Card Purchase Surcharge 1.5% (and a discussion on TIPS)

As far as I know we as customer not suppose to pay anything extra like surcharge on credit card purchase except in some cases like Petrol bills (but some card issuer pay it back). But In Delhi all jewellery shops and mobile phone shops do charge 1.5% extra on any purchase. Do they allowed to charge these, is there any guidelines from RBI on such charges?
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Old 16th August 2008, 11:12   #2
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Jewellery shops in Bangalore too charge 1.5% extra if we pay through credit card. The establishment which uses the swiping machine has to pay a service fee to the service provider (like HSBC, HDFC Bank, Citibank etc), which in some cases the shops recover from the customer. I have refused to buy in a few jewellery shops to see if they will waive this fee, but they are willing to let the customer go. Not sure if there are any RBI guidelines on levying this type of fee.
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Old 16th August 2008, 11:22   #3
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Quote:
Originally Posted by sam003 View Post
As far as I know we as customer not suppose to pay anything extra like surcharge on credit card purchase except in some cases like Petrol bills (but some card issuer pay it back). But In Delhi all jewellery shops and mobile phone shops do charge 1.5% extra on any purchase. Do they allowed to charge these, is there any guidelines from RBI on such charges?
Sam - there is no such thing as "customer not suppose to pay anything extra like surcharge on credit card purchase "

historically Petrol pumps have charged this commision back to customer because of the margins they operate under..

with it being a buyers market with most products and increased competition,many products sold that heavy discounts now start claiming the 1.5% discount from customer on credit card purchases too

this is similar to a supplier charging you extra if you were to pay by outstation cheques etc. there arent any RBI guidelines to the best of my knowledge
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Old 16th August 2008, 11:25   #4
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I think the 1.5 or 2 % charged is all crap. If you argue enough, the shops waive those off, so I feel it's a money making racket.
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Old 16th August 2008, 11:34   #5
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Originally Posted by prabhusati View Post
Jewellery shops in Bangalore too charge 1.5% extra if we pay through credit card. The establishment which uses the swiping machine has to pay a service fee to the service provider (like HSBC, HDFC Bank, Citibank etc), which in some cases the shops recover from the customer. I have refused to buy in a few jewellery shops to see if they will waive this fee, but they are willing to let the customer go. Not sure if there are any RBI guidelines on levying this type of fee.
Surcharge on petrol, railway tickets etc. are mandatory and the bank charges this atomatically on the transaction (expect if you have a card which reverts these charges). But taking 1.5% additionally from customer is illegal and if notified to the card company, the shop will be fined + machine removed. The credit card company is indirectly increasing the business of the shopkeeper by allowing him to use the card facility and he is supposed to pay this small percentage. But in many shops I have seen it written in public that customer has to pay this. This is illegal!

I know a haircut saloon in HSR Layout which has written in public that they will charge 12% VAT for card payments. It is clear that he is not paying tax to government for all cash payments!

Nirmal

Last edited by nirmalts : 16th August 2008 at 11:35.
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Old 16th August 2008, 12:39   #6
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This what I read in Rediff.com
" I am sure you must own at least a couple of credit cards. After all, aren't they a handy piece of plastic that eliminates the need of carrying around wads of cash?
But how often have you noticed that the merchant/retailer charges a 2-2.5 per cent transaction fee on your credit card purchases? Why?
Because the merchant has to pay a small fee to his own bank and to the company (mostly either Mastercard/Visa) that issued the card to you. Be it at a hotel, mall, petrol pump or an online transaction; they all charge you this 2-2.5 per cent transaction fee.
What you probably don't know however, is that this amount, as per the rules, is supoosed to be paid by the merchant outlets from their own pocket. Instead, the amount is transferred to you, when in fact it is not at all obligatory.
Do you think this is a fair practice? Have you ever put your foot down and refused to pay the 2-2.5 per cent transaction fees and yet managed to buy the goods that you wanted? "

This is what they say in reply
"
I have experienced this. Merchants say that they have to pay rent for the EDC machine and/or processing fee. More than the customer, it is merchants who put their foot down, demand & finally win.

Every credit card (CC) holder should be aware of CHARGE BACK; the only protection for customers.

What is 'charge back' and how does it work?

If a customer is unhappy with a purchase thru CC, s/he can demand for 'charge back' so that banks will reverse the amount billed on CC. That is, bank will cancel that purchase & will not pay the amount to merchant. Net result is customer need not pay for that faulty product or unsatisfactory purchase. The charge back can be claimed within 180 days of the purchase date. Does any bank educate customers of this fact?

When the MOTO (Mail Order / Telephone Order; a.k.a MOPO-Mail or Phone Order) was in practice without the CVV number, a merchant charged my brother for an unwanted holiday package. After noticing the charge in the statement we demanded the bank for charge back successfully.

Next time when merchants demand a 2% transaction fee to be paid by me, I would like to ask them to bill it separately and collect a receipt for the same. Later go for charge back.

Last but not least, I do not think banks are bothered as long as they get the transaction fee; whether it is paid by the merchant or the customer."

Good option I guess

Last edited by Rehaan : 16th August 2008 at 21:11. Reason: Formatting tags removed.
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Old 16th August 2008, 16:18   #7
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What is a really a killer are forex transactions. HSBC juice me by 10% in currency exchange rates when shopping abroad. Does anyone know any alternates?
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Old 16th August 2008, 17:30   #8
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Wasn't there a recent directive by RBI that surcharge should not be charged to the customer?
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Old 16th August 2008, 19:46   #9
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True! Apart from specific items like petrol stations, railway tickets etc. are not supposed to charge any surcharge to the customer. The merchant agreement for others does not allow this. And technically the cardholders can complain to the issuer of any merchant demanding higher charge for card. But the action the issuer can take is limited to suspending or terminating the merchant in reality this never happens; because the card issuer also does not want to lose the merchant. At many places if you negotiate, then will agree to waive it I have been quite successful here though not always.

As part of merchant agreement, the merchant has to pay the card issuer a commission that varies could be up to 2.5%; but as mentioned by someone above, the merchant has to bear it in return for the business he gets. Having said this, today there is competition amongst card issuers also to enroll merchants. So today some of the big merchants like big retailers, jewelers etc. in fact negotiate and get lower or nil rate commission also.

Ultimately it is market dynamics at work.
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Old 16th August 2008, 21:03   #10
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Ask them to issue the bill which distinctively shows this %age and fax a copy to the CC company. (except for PP, Railways etc)

Thats it, you get back your extra charge and the shop looses the credit machine.

But I doubt if any shop will show this separately.

Last edited by dadu : 16th August 2008 at 21:04.
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Old 16th August 2008, 21:14   #11
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Ask them to issue the bill which distinctively shows this %age and fax a copy to the CC company. (except for PP, Railways etc)

Thats it, you get back your extra charge and the shop looses the credit machine.

But I doubt if any shop will show this separately.
No merchant will give a bill including this. In fact in one hospital in Bangalore, I have a seen a board which says 1.5% extra for card and no bill will be issued for the same may be once can take a photo of this board and send! Along with your bill for 100/- and charge slip for 101.50!
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Old 17th August 2008, 11:25   #12
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Ask them for a separate line item for this tax %age, yes noone gives it.

If its displayed, take a picture and send along with your bill to your CC company.

I wonder why people accept it, once I refused to pay and paid cash instead(they sent their boy to the nearest ATM with me). I dont rotate money and dont have black money either, so it doesnt make any difference if I pay cash now or the CC company 30 days later.

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No merchant will give a bill including this. In fact in one hospital in Bangalore, I have a seen a board which says 1.5% extra for card and no bill will be issued for the same – may be once can take a photo of this board and send! Along with your bill for 100/- and charge slip for 101.50!
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Old 17th August 2008, 12:09   #13
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ajmat saab, best is to carry loads in INR aborad. Convert at the airport places - you will get the best exchange rate by far. exchange rate is horrible otherwise.
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Old 17th August 2008, 12:42   #14
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What is a really a killer are forex transactions. HSBC juice me by 10% in currency exchange rates when shopping abroad. Does anyone know any alternates?
Dear Ajmat when i was going abroad i called the Amex guys(my card vendor ) they said they would charge only 3.5 % as forex . I dont know why HSBC billed you 10 % . Kindly check with them . Mail their customer support and ask them to justify. I checked with HDFC too , they charge 3.5 % only.
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Old 17th August 2008, 12:53   #15
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What is a really a killer are forex transactions. HSBC juice me by 10% in currency exchange rates when shopping abroad. Does anyone know any alternates?
Hi, used a StanChart Bank Titanium card, and a colleague used an ICICI Bank Platinum card outside India. We found that both were charged an additional rupee and fifty paise per dollar (approx.) as conversion charge. Does the charge look nominal?

Also FYI, the SCB Titanium Super Value card looks appealing for domestic transactions too. There's a 1% cash back for retail transactions > Rs.1K, 5% cash back on telecom transactions, 2.5% cash back (plus 2.5% surcharge reversal) on fuel purchase. Disclaimer: There's annual fee though, which is usually charged as a one-time fee, and can be recovered in no time, if used on all the above transactions.
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