[travelling owl]

JEEP service center in Yeshwantpur, Bangalore (KHT JEEP) also charges 2% extra for credit card. They dont charge this for servicing but for accessories. Last time when I went there to buy floor mats, they said they will charge 2% more for cards and for UPI its free. Ended up paying via paytm.

[aayusht]

In Australia, such practices are normal (and in many places in Europe I believe). lots of stores charge and display on their doors that they charge x% for mastercard/visa and y% for Amex. Though not all stores charge this fee.

[varkey]

If you have a Rupay Credit Card from specified banks (HDFC, Axis and few others), you can make UPI transactions with the credit card. For the merchant it would appear like a regular UPI transaction at least initially.

If the transaction is Rs 2000 or below, merchant can accept the transaction at 0% MDR, however for transactions above Rs 2000, their usual MDR will apply. The tricky part here is, for the merchant, the UPI transaction would appear as a regular UPI payment, and need not immediately know it was done with a credit card. Even the PayTM SoundBox or PhonePe SmartSpeaker which announces the receipt of payment, will announce the full amount. The MDR gets debited maybe a day or two later, when the transactions gets settled.

[poised2drive]

The extra 2% on Credit Cards is charged by almost all the minor establishments.

But I did face the same issue with the Metro Honda when I went for my City's First Service. When the mode of payment was asked, I said it'd be done through the Credit Card and the cashier informed about the 2 pc extra. I immediately asked to see the Manager of the facility and that 2 pc charge was dropped.

Its a way for testing waters, atleast in the major establishments, I reckon - if the customer obliges and pays through CC, they'd save that MDR . And if customer makes noise regarding that charges, they simply oblige !

I don't think major Car Service centers would put confinements on the mode of payment given the size of volume and the billing values. What they might do is Test the Waters !

[neeraj0272]

Originally Posted by car-dent

Whatever the profit margin, as per the merchant agreement, any seller is not allowed to charge anything "extra" for accepting credit cards. Except Petrol pumps and Govt establishments like electricity, railways,etc. They have different agreements and surcharge can be charged by them.

So while its a common practice by businesses with thin margins to charge extra 2% from customer, its completely illegal.

It is an agreement between the card company and the merchant. This agreement does not concern customer. If it is "illegal" then it is up to card company to take action. I would say that it is not "illegal" but a commercial dispute with the end result that any of these parties may terminate the agreement and go there separate ways. But as a majority of merchants charge extra for CC then this means that card companies do not have the financial clout to enforce their own agreement!

[car-dent]

Originally Posted by neeraj0272

It is an agreement between the card company and the merchant. This agreement does not concern customer. If it is "illegal" then it is up to card company to take action. I would say that it is not "illegal" but a commercial dispute with the end result that any of these parties may terminate the agreement and go there separate ways. But as a majority of merchants charge extra for CC then this means that card companies do not have the financial clout to enforce their own agreement!

If you sign a contract with someone and not follow it, it becomes an illegal act. I am not talking that it is illegal for customer, but it's definitely illegal for the merchant to ask for extra charges for card payment.

Not all illegal actions get punished in India. If, for whatever reasons, the card companies do not take action, doesn't make the act legal.

[SamitMukherjee]

Charging 2% extra on credit card payment is not as per RBI norm. I have faced scenarios where small shops have accepted credit card without charging anything whereas big merchants like Tata motors sales team and Bridgestone retailer have asked me to pay. Obviously had to opt for other payment methods.

[priyankarb]

Originally Posted by dsuman

I used to own a Pharmacy till last year. We used to accept Card payments but the Bank used to charge us 2% extra on Credit cards and 1.5% on Debit cards for using their Card machine. Upon asking for Waiver they refused since the Machine is given free of cost. Minimum charge is 0.5% but that is applicable when a Threshold of payments received (for us it was 15 lakhs per Month) is reached per Month.

We used to absorb the cost and not charge the customer for Card Payments. So I wont find fault with the Jeep Dealer. They may wish to waive off this 2% but then they may also not.

If the bank charges, let's say, the minimum of 0.5% of the transaction value for businesses exceeding 15L per month, this translates to INR 7500. This is still acceptable for a large-sized business, but let's imagine they are charging 2% or 2.5%, and you run a business with a monthly turnover of, say, 10L through card payments. In that case, you end up paying 20K or 25K respectively as bank charges. Now, that can equal the salaries for your staff or real estate rent, creating a significant dent. We can reasonably estimate that these figures are in the ballpark, but not too far off, as banks can have some exceptions to the threshold for businesses based on relationships.

So, I agree, and it really leaves nothing for small enterprises to absorb or waive off the charges levied by the bank, but Jeep, I guess, can be flexible: confused: That said, I just swiped INR 300 at a local shop, so the owner may have lost 6 bucks and still seemed happy?

[sukhbirST]

In a way it is correct to charge for what he has to pay to credit card company. It is not binding on him to take payment by credit card. As long as he is taking correct price and providing bill it is ok. Long back in singapore they used to give 2% discount if you paid by cash.

[headbanger]

Originally Posted by SmartCat

4) When the margins are low.

If the shop owner has a margin of 5% to 10%, it might not be feasible for him to lose 2% on credit card payments.

Then why take the pain of keeping a POS for credit card. Just say we don't accept credit cards. Gone are the days when digital transaction meant credit card predominantly. Use other options like UPI, debit card or wallet for smaller transactions.

I mean the whole essence of credit card is to add ease of payment and in the process change consumer behavior to spend more. Keeping a POS and then dissuading a potential customer to not use credit card is contradictory.

[Fx14]

Originally Posted by priyankarb

That said, I just swiped INR 300 at a local shop, so the owner may have lost 6 bucks and still seemed happy?

Depends on the products purchased at the local shop. Probably the profit margins are much more than the 6 bucks and also the possibility of losing out on the sale altogether if the customer didn't carry out the transaction other than by card.

[Zippy_wheels]

Originally Posted by Mr.Ogre

When I was in India I hated this practice of paying 2% more while using credit card. I am not sure if this is legal in India.

I am sure it is legal in India. For example, the Maharashtra state electricity board charges it too, when paid on their website mahadiscom.in. Here is a snippet from their website.

[MSC]

I live in a Tier 4 city in Himachal Pradesh. My local Hyundai dealer used to charge this 2% extra every time when service or any other issue was related.
Once he asked for 2% extra. That time I didn't said anything. Quietly paid despite knowing that it's wrong.
Now, all Hyundai customers know, once you go for service or any other repair work, the service station customer service support will span you like anything to get a 10/10 score on call.
Their modus operandi is that first the service station will call and confirm the rating and then in couple of days you get a call from their headquarters may de Delhi or something regarding the service feedback.
I was waiting for the service station call. Once the call came, I told the dealer service support everything. That I was charged 2% extra. I told that I paid around 16 thousand for a one lakh kilometres service but you ask me to pay 320 odd bucks illegally.
The poor lady was literally rattled as this was first time someone pointed this. She told to get back . Same evening they refunded 350 bucks plus 3 car wash coupons with request not to tell this when service headquarters call.
It's very much sure that you too will get such a call. Tell them jour issue and they should look into this.

[binand]

Originally Posted by Zippy_wheels

I am sure it is legal in India.

As far as I know, charging extra for a specific payment method is quite legal - usually to cover the overheads of processing the payment (like it is here), or to cover the risk (standard practice for cheque payments), or for other reasons (eg: once upon a time it was quite normal to pay 10-20 rupees extra for any payment made via non-local cheques because clearance time was measured in weeks).

The reasons merchants don't do this across the board is that (a) they understand the value delivered by payment cards and are willing to bear the cost, and (b) their contract with Visa/MasterCard prohibits this.

Most of them know the cost of handling cash - storing it overnight/over holidays on premises, and transporting it to banks over public roads. Robbery/theft, pilferage/skimming, fraud, accidents/spillage/fire/arson - all are possible and card payments mitigate these risks somewhat. Then there are things like higher spending threshold and therefore higher ability to cross-sell/upsell.

As for the contractual obligation, at least in the US merchants accused Visa/MasterCard of being anticompetitive in this aspect and got a favourable settlement.

MasterCard, Visa [and others] agreed to pay more than $6 billion to settle accusations that they engaged in anticompetitive practices in payment processing.

[...]

Under the credit-card settlement [...], merchants can charge higher prices to consumers who decide to pay for their purchases with credit cards.

[Hayek]

Have never paid physically at a dealer but most payment gateways levy a convenience fee which is higher for credit card transactions and lower for bank transfers or UPI.

Usually pay for my BMW and VW service through a direct transfer to the dealer’s account and avoid the extra charge. Though of course it is worth paying 2% to the dealer to get 3% reward points on Infinia Cards in months where you are unlikely to hit the cap.