[Ironhide]

This is a perplexing situation I found myself in and here I seek advice as to whether what the Honda Dealership did was correct? If not then who can I approach to set it right? I've already dropped a communication to HMSI on their website and it has been more than a month but there has been no further communication.

I took my CBR 250R to Ess Ell Motors , Rajpur Road in Dehradun for routine servicing and some other jobs that needed looking into. The total bill including the labour and parts was ₹ 7194.87. When I took out my debit card to pay the accountant told me that there will be 1% extra levied on the invoiced amount in the bill if I paid through card and they would charge ₹ 7267. This, they said was applicable for payments in excess of ₹ 5000/-. I was surprised - weren't electronic payments supposed to be encouraged to reduce circulation of cash? In that case Ess Ell Motors (and Honda / HMSI as a corollary) were encouraging malpractices and charging more from customers. I went up to the manager and he said that there was some charge (up to 1%) that the bank levied that they were obliged to extract from the customers and it was approved at the highest levels (?).

Pictures of the bill and the receipts are attached.


The Final Bill. If you see in the Right lower corner, the amount is ₹ 7194.87


The receipt after I had paid by a Debit Card. The amount charged is ₹ 7267 after adding 1% to the actual amount.


The bill with Card Receipt


Swipe Machine Receipt

I felt that charging 1% extra over the invoices amount was not justified, yet I had to pay because I didn't have cash.

What I want to know from those knowledgeable on the matter is ,

• Whether Banks do charge 1% extra on card transactions which these merchant establishments then pass on to iys & ask us to pay? The manager said that it was SBI in their case. ( Some member knowledgeable on this or working in the SBI may please shed light on this).
• If not, then is there an ombudsman / regulatory authority that looks into these practices, and whether they are justified in charging their customers in such a manner? How can the ombudsman know how many such card payments have been done in the past? The amount I was charged over and above was small (₹ 71 approximately) but collectively, over a long period this extra amount could run into thousands or even lakhs !
• Honda (HMSI) didn't reply to my query on their website. How can I take it up with them?(I'm not on social media.)

Cheers !

[libranof1987]

Originally Posted by Ironhide

[*]Whether Banks do charge 1% extra on card transactions which these merchant establishments then ask us to pay? The manager said that it was SBI in their case.

Payment gateways (Visa, Mastercard, AmEx) charge the banks for use of their services for card payments which the banks pass on to the merchants. The charge varies from 2% (Visa, Mastercard) to ~3.4% (AmEx). These are indicative %.

[*]If not then is there an ombudsman / regulatory authority that looks into these malpractices? How can the ombudsman know how many such payments have been done in the past. And how can these unsuspecting customers paid back? The amount could room into thousands or even lakhs ![*]Honda (HMSI) didn't reply to my query. How can I take it up with them?(I'm not on social media.)

I don't think there is any regulation on whether merchants can pass this charge on to the customers.

In the pre-demonetisation era, a lot of merchants (across industries) blatantly passed on this charge to customers who paid by card. Post, they're much more receptive. I have rarely come across a merchant who'll charge extra for card payments since Nov '16. I doubt Honda will make a lot of difference in this case.

[GTO]

On the one hand, it is quite cheap of the dealership to do this. As libranof1987 posted, I too haven't come across anyone charging an extra % for card payments in 2 - 3 years. Our government is supporting digital payments in a big way.

On the other hand, it is an additional cost to the dealer (versus cash / NEFT / cheque). And not just this dealer, sometimes you'll see 'convenience charges' added to your petrol pump bill too in credit card statements. Should they write it off as a cost of business or pass it on to the customer?

Luckily, we don't have to worry about it as the RBI has banned these extra charges. You should lodge a complaint with your bank & the RBI if this really bothers you. Also check out pgportal (Heard of pgportal.gov.in? About time you do).

[ashis89]

Few dealers are indeed passing on such transaction charges to the customers for card transactions. However they seem to be doing it selectively, for higher value transactions.

Less than a month ago, I was at Vihaan Kia for the first free service of my car. While I was waiting there, a lady came to take the delivery of her car. There was a pending amount of 2 odd lakhs INR and she wanted to pay through her card. The Accounts person told her that they have to levy 2% extra for any card transaction and it was an instruction from their Management. The lady was furious and started shouting at everyone present there.

By then, my car was ready and my bill was 32xx INR. I paid by card and I wasn't charged an extra dime.
My interpretation: bank/merchant/dealer are not charging extra for small value transactions but encouraging customer to use other payment methods for higher value.

[Vysakh]

Originally Posted by libranof1987

I don't think there is any regulation on whether merchants can pass this charge on to the customers.

There is some RBI guideline that forbids this.
The merchants can however charge the customer a 'convenience fee' though.

[Sk8r]

Yamaha dealers do this. IIRC they charged 2.5 - 5 % for purchase of spares. This pissed me and I spoke to customer care as well.

- Surprisingly, they are aware of it and they don't have any guidelines as such for their dealers on payment related intricacies

- I also remember paying thousands in cash when I bought Chain sprocket/ Bushes/ Accelerator cable

[roy_libran]

With any Credit/Debit cards, the fine print usually is that a merchant cannot levy any transaction charge/fee for an undiscounted price.
If however, there is any discount (whether real or mathematical), then they are free to levy the said charge.
From the receipt above, it is not clear whether they discounted, and hence, if you raise this with your bank and the cardscheme, you shall certainly get the 1% back, and the merchant shall receive a tap on his wrist!

[superbad]

This is taken from Kotak Mahindra's banking website :-

If you regularly use credit cards for shopping, the chances are that every once in a while, you have been asked to shell out an extra 1% or even 2% at POS (Point of Sale) counters for using your card. Before even getting into the details of why merchants do this, what you need to know is that this practice is definitely wrong and that there are RBI regulations that allow penalising such merchants by blacklisting them.


How does it work?

When you swipe your card on a POS machine, the merchant has to pay a small percentage (about 2%) as rental fees to the bank for using the POS machine. Ideally, these charges are to be borne by the merchant as a part of the cost of running the business, and in particular, for having the convenience of taking payments through a POS. But some merchants try to recover this charge from customers.

In the RBI's own words: "…merchant establishments levy fee as a percentage of transaction value as charges on customers who are making payments for purchase of goods and services through cards. Such fees are not justifiable and are not permissible as per the bilateral agreement between the acquiring bank and the merchants…"

RBI adds that any such instance can be used as a strong argument by the bank to terminate its POS-linked relationship with such merchants.


Why are merchants wrong to charge that extra amount from customers?

Nowadays, with the proliferation of PoS machines and ATMs, people do not generally carry a large amount of cash when they go shopping. In this scenario, it works to a merchant’s advantage to have a PoS machine installed. When a shop lets their customers pay using cards, it sells more than what it would have with only cash purchases. Technically, merchants can accept cheques, but they hardly do, because of the fear of these cheques being dishonoured. So, even if we were to keep RBI regulations aside for a moment, common sense says that having a PoS machine is in the best interest of the merchant. When a customer uses credit cards or debit cards, the merchant is assured of getting his money immediately after the transaction is approved.

Therefore, in an ideal scenario, it is clear why the merchant should not be charging customers for using the PoS machine. However, we do not live in an ideal world. There are cases when a merchant tries to pass on the 2% expenditure onto the customer, even at the risk of getting the business blacklisted by the bank.

What would you do if you have to buy something urgently and do not have cash in your account to withdraw from a nearby ATM? Chances are that you would give in to the merchant’s demand for a 2% fee for using your card. The best option for you in such a situation would be to tell the merchant that you are aware of RBI’s regulations and can make a complaint with the bank to get the merchant blacklisted. If the merchant is ready to reduce the charges, then you might be willing to pay a small fee to go ahead with the transaction. In most cases, this would work, as the extra charge would be shared by you and the merchant. However, if the merchant is already earning a high margin and still charging you for a card payment, it is only right for you to refuse to pay the extra amount.

The next time a merchant asks you to shell out that 1% or 2% extra for card payments, rest assured that you can tell the merchant that you are well-aware about the RBI's notification on Credit Card transactions at POS'and will not be taken for a ride.

https://www.kotak.com/en/knowledge-c...nsactions.html

In a nutshell, merchants have to pay 1-2% extra for card swipes, however RBI has discouraged recovery of the same from customers. I think you have a valid case requiring redressal.

Edit : attaching an RBI notification specifically banning such charges on debit card :-

https://m.rbi.org.in//scripts/Notifi...Id=8461&Mode=0

4. Levying fees on debit card transactions by merchants - There are instances where merchant establishments levy fee as a percentage of the transaction value as charges on customers who are making payments for purchase of goods and services through debit cards. Such fee are not justifiable and are not permissible as per the bilateral agreement between the acquiring bank and the merchants and therefore calls for termination of the relationship of the bank with such establishments.

[Thilak29]

This also indicates the tough times we are in where car dealers/service centres try to maximise their profits by levying charges which are usually borne by the business. I recall a thread where dealer charger customer for some stationary part of the registration process. Tough times.

[IRS]

This is an old phenomenon which was prevalent in the early days of non cash payments but companies hardly practice this nowadays. Such costs are generally absorbed by the merchant/service provider.

Also as pointed out in the post by superbad this practice is illegal as per the agreement between bank and the merchant.

Further, the merchant here is charging the 1% without levying GST on the 1%, which as far as I know is also illegal.

[blackwasp]

Originally Posted by Ironhide

When I took out my debit card to pay, the accountant told me that there will be 1% extra levied on the invoiced amount in the bill if I paid through card and they would charge ₹ 7267.

This is just plain stupid. You should have asked them to give back the bike in the original condition and you would be happy to take the bike elsewhere.

Jokes apart, I also don't like the fact that you got a 'kaccha' (rough) bill instead of the charges being included in the proper bill. This is what gets on my nerves. Take the 1%, but be clear about it from before, and include it in the bill and not just a hand written note. This practice is well prevalent in many places but as a consumer, you should have been aware. When I went to a dealer / workshop and he said card payment will incur 2% extra charges, I simply walked away. Just take your business elsewhere.

These costs are just expenses incurred in running the shop. Do they charge you extra for a dealership in a city vs the outskirts where the rent is higher? Same as being charged extra for a cold bottle of coke at tourist places - unless they get a refusal from many customers to not pay over the MRP, this practice will not change.

[ike]

Originally Posted by GTO

On the one hand, it is quite cheap of the dealership to do this. As libranof1987 posted, I too haven't come across anyone charging an extra % for card payments in 2 - 3 years. Our government is supporting digital payments in a big way.

The so called "premium" outlet Nexa charged me two hundred odd bucks when I booked an Scross (11k was the booking amount) in May'17. In hindsight I should have just booked it on MSIL website.

[scorpian]

I was also charged by MASS when i went to purchase my sx4 and wanted to make some payments via card. They wouldn't budge and since it was closing time i had no option but to pay.

I get quite irritated when merchants ask for extra 2 percent and i feel its unjustified on their parts to charge us for it.

I did speak to HDFC on this issue and they asked me to get a separate bill for the 2 percent being charged and then they would take action, but that's next to impossible as none of the merchants agreed for the same.

[2000rpm]

I think its unfair to the merchant to shell out 2% from his pocket on Revenue, however a lot of people to accept this.

There are a lot of merchants which do not accept Amex and Diners as they charge in the range of 3-4%.

The government is pushing a lot of things without really thinking about the stakeholders involved. Should these merchants charge lower. 2 % flat is very high for practically usage of the portal, which is negligible cost.

[AdityaDeane]

Originally Posted by Ironhide

I took my CBR 250R to Ess Ell Motors , Rajpur Road in Dehradun for routine servicing and some other jobs that needed looking into. The total bill including the labour and parts was ₹ 7194.87. When I took out my debit card to pay the accountant told me that there will be 1% extra levied on the invoiced amount in the bill if I paid through card and they would charge ₹ 7267.

This is not just the problem with Ess Ell Honda. A few years ago I took my Unicorn 150 to Sai Honda Doiwala and there also they were asking me to pay extra 2% of the bill amount if I wanted to pay by card, and this was despite my sister working there as a Receptionist back then. The amount was around 7 odd hundreds, so I took out cash and gave. But this is the problem in all of Honda showroom and service centers at least in Dehradun.

If you can get a satisfactory response from HMSI then do let me know as well, so that I can tackle them better the next time I am asked to pay more for Card Payments.

P.S. - Since you're from Dehradun as well, do P.M. me your contact details and we can catch up when I come home every few months.