The Indian payment sectors have been raising the charges for various transactions. Many nationalised banks have increased their cash withdrawal charges from Rs 20-28 to Rs 150. HDFC Bank, ICICI Bank and others have made these changes to restrict cash transactions. Digital wallet giant, Paytm has also imposed a charge for adding money to the Paytm wallet via credit cards to 2%. While the customers battle this new line of charges to spend their own money, merchants also have a hefty price to pay in the form of MDR or merchant discount rate. The issue of increased MDR came to light when fuel stations threatened to discontinue card transactions. In addition to these increased charges, State Bank of India has also brought a rule that charges penalties for not maintaining Monthly Everage Balance(MAB) of up to Rs 100 plus service tax. The main issue of these increased prices has been in the rise post demonetisation. Demonetisation deadline ends: What are the Hidden Charges for Debit and Credit Card transactions?
Narendra Modi’s currency demonetisation left the nation in a state of utter shock and cause chaos which is still felt in many parts of the country. Prime Minister Narendra Modi came up with the idea of currency demonetisation in an effort to provide a boost to digital payments, curb black money transaction and also increase plastic money transactions. Digital payments and card transactions received a boost, and the lifestyle of people in India experienced a change as various charges were exempted for the trial period of currency demonetisation. However, the loss incurred by banks had to be covered, and this is a key reason for the sudden rise in various charges made by the banks. From increasing the cash withdrawal charges to the rise in card charges for digital payments, the Indian payment systems like banks and digital wallets have made spending our hard earned money extremely difficult. Here is a look at all the increased charges that will be incurred to spend our money.
1. Cash Withdrawal charges or ATM Charges
India has majorly been a cash-based economy. This was the main reason why demonetisation hit us on a much larger scale. However, the government eased the troubles by not levying charges on using other bank ATMs for withdrawal of cash. However, the banks have made this simple task of withdrawing cash an expensive affair with their cash withdrawal charges. Banks like HDFC, ICICI, etc. have imposed a transaction charge of Rs 150 after four transactions. This new rule is making it difficult to use liquid cash. While banks levied a transaction charge of Rs 21 to Rs 28 after a set of free transactions, the new transaction charges increase the price to a whopping Rs 150. Cash deposits into accounts had been free in all banks. Banks try to restrict cash transactions, image with new cash handling charges goes viral.
The new transaction charges imposed by banks charges a minimum of Rs 150 on both cash deposits and withdrawals. This change will be effective for both savings as well as salary account. The banks have also said that in addition to the Rs 150 paid on the fifth transaction, customers will be charged an extra cess and service tax as well. This new rule has made it impossible for people to use cash at their own will and wish and have made a visit to the ATM a calculative step which can be extremely expensive.
2. Loading Paytm Wallet
Since the cash transactions have become expensive, the easier option for consumers has been to use digital payment wallets. The most used digital payment wallet has been Paytm, whose users increased exponentially post demonetisation. The Payment wallet has been providing free charges for the use of debit and credit cards through their wallets. Most Paytm users have been using the wallet via their credit cards and enjoyed the free service. However, starting March 8, this free transaction will be a thing of the past as Paytm has announced to levy charges for loading their digital wallets via Paytm. BHIM, Paytm, UPI, or SBI Buddy: Which is the best payment wallet app to download in India?
Paytm released a press release which stated that they have been paying hefty charges for users using their credit card, which has been exploited by some financially savvy users. Paytm has come up with a solution for this issue and plans to levy a charge of 2% fee for loading their Paytm wallet via credit cards. However, Paytm has also agreed to reverse this payment received in the form of discount coupons that can be used. Paytm has also released two new payment options in their wallet, UPI and IMPS.
3. MDR charges on swiping your cards
While the previous charges were paid by consumers, MDR or merchant discount rates have been eating the profits of merchants and shopkeepers. The Indian government had waived MDR post demonetisation to boost card payments made to various merchants. However, this exemption was only until December 31, 2016, and the charges were reinstated in 2017. MDR is a bank fee levied for using debit and credit cards on swipe machines. The fee is 1% of credit card transactions and 0.25-1% on debit card transactions. MDR is levied at the time of purchase, and paid to the bank.
In Addition to these changes, banks are also increasing their charges on failure to maintain minimum balance. State Bank of India plans to levy penalty charges of Rs 100 plus taxes on failure to maintain a minimum balance. These increased charges which are creating new chaos in our lives post demonetisation has made is extremely difficult for people to spend the money they want in the way they want. While we understand the need for boosting digital payments, the increased penalties and extra charges on our hard earned money has made life difficult for people in India.