Business

Pay rent via ICICI credit card to collect 1% fee

“Dear Customer, starting from October 20th to 22nd, all transactions on your ICICI Bank Credit Card towards the payment of rent will be charged 1% fee.”

Do you have an ICICI credit card and receive such a message? It is for cardholders who use their credit card to pay rent through platforms like Cred, RedGiraffe, Mygate, Paytm and Magicbricks, among others.

To date, no bank or credit card company has charged any fees for such transactions. ICICI Bank was the first to introduce a fee for rent payments made through its credit cards, and other banks are expected to follow suit.

What have you paid so far

The tenant adds the landlord’s bank account details or UPI (Unified Payments Interface) address according to the recipient preferences on the platform and completes the transaction using his/her credit card.

Platforms that support such transactions charge convenience fees of 0.46-2.36% per transaction. This convenience fee replaces the MDR (merchant discount rate) that online platforms charge merchants who use a user’s card service to accept bill payments. Since the seller in the rent payment feature is the landlord, who will not pay a fee when receiving the rent, the platforms charge the user to pay the rent as a transaction fee.

The 1% fee charged by the ICICI bank will be added to the transaction fees imposed by the online platforms.

Why charge this fee

While a bank that doesn’t label the fee can determine why it’s being charged, it can be a way to limit the abuse of the rent payment feature to circulate credit.

Industry experts have shown that customers add their family or friends as hosts on these platforms and transfer funds in their bank accounts to convert to cash with no additional fees. Fees for withdrawing cash from ATMs by credit card range from 2.5-3% of the withdrawal amount.

Paying rent through the credit card feature can be easily abused as all online platforms that offer this facility, except RedGiraffe, do not require a rental agreement to validate authenticity. of the transaction.

“This fee is introduced to prevent credit transfer through bogus rent payments. In the past, banks have introduced a surcharge of 0.25-1.8% when booking train tickets and paying for fuel via credit card to prevent similar behaviors,” said Kashif Ansari, assistant professor , Hansraj University, University of Delhi, said.

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