Are merchants allowed to charge extra fees for card payments?

No, merchants cannot charge any additional fee from customers for card payments.

What should I do if a merchant tries to charge me extra for using a card?

One can politely let the merchant know of the RBI rule, or can simply cancel the transaction and walk out.

Can merchants have a minimum transaction amount for card payments?

No, merchants are not allowed to have a minimum transaction amount for accepting card payments.

How can I ensure I am not overcharged for card payments?

Ask the merchant for a proper bill breakup, and refuse to accept any additional fees. You can also leave bad reviews and report the mechant on the official RBI portal or consumer forum.

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Merchant Discount Rates | Latest Guidelines and Implications for Businesses l Jaagruk Bharat

Alankar Mishra

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Updated: 28-01-2025 at 6:09 AM

Merchant Discount Rates | Latest Guidelines and Implications for Businesses l Jaagruk Bharat

The growth of cashless payments in India through channels like debit and credit cards, UPIs, and mobile wallets is driving greater financial inclusion. Digital transactions enable purchasing convenience while powering small businesses with instant settlements and improved cash flows.

However, many citizens complain of merchants forcing them to pay additional percentage fees on card payments, though RBI guidelines explicitly prohibit this practice. Lack of awareness enables vendors to blatantly disregard rules and continue illegally extracting charges as high as 2-3% of transaction value from customers.

Let’s understand the relevant RBI guidelines regarding POS charges and how to tackle overcharging.

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RBI Rules On Merchant Discount Rates

The merchant discount rate (MDR) is the fee paid by merchants to banks for accepting payments from customers via credit or debit cards or prepaid payment instruments.

As per RBI norms, merchants cannot:

charge any additional fee from customers for card payments.
Require minimum transaction amounts for accepting card payments.
Refuse card payments for lower ticket-size purchases.

The costs related to card processing are completely to be taken up by the merchant and their bank. Customers face no charges apart from applicable taxes.

This policy aims to promote cashless customer convenience and standardise payment acceptance infrastructure across India.

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Common Tricks Adopted By Merchants To Collect Charges

Despite strict RBI guidelines, merchants come up with innovative ways to recover their MDR costs from customers:

Explicitly asking for 2% fees on card payments.
Forcing the purchase of coupons for an amount higher than the bill value.
There are two different price lists, one higher for card payments.
Mandating card payment only above a certain bill amount.
Refusing cards for low-ticket transactions.

These tactics allow shops and outlets to easily blend and pass off charges within transactions. Customers end up paying more for card payments, though RBI regulations prohibit this practice.

How To Tackle Overcharging By Merchants?

Here are some steps to counter additional charges demanded by sellers on card payments:

1. Politely inform about RBI Rules: Educate vendors that charging customers is illegal. If done respectfully, some revert to such demands.

2. Pay Only Listed Rates: Clearly state that you will pay only the officially displayed rates via any mode. Additional fees cannot be charged to the customer.

3. Cancel Transaction: Walk out, refusing service if forced to pay more for cards. This draws the attention of other customers, cornering sellers to reconsider policies.

4. Demand Bill Breakup: Ask vendors to provide a proper bill breakup clearly mentioning all of the applied charges. This creates transparency, exposing misleading claims.

5. Threaten Reporting: Warn misbehaving merchants about complaining to their head office or the RBI officials. Fear of suspended licenses often helps halt such offenders.

6. Leave Negative Reviews: Spread awareness through word-of-mouth and social media complaints against outlets charging illegal fees. This impacts brand image, driving policy changes.

7. File RBI Complaint: Last but not least, submit an official complaint to the banking regulator regarding additional charges imposed by merchants in violation of rules. Strict penalties often force refunds along with compliance.

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Way Forward

By taking such apt and strong measures and standing your ground against these merchants and banks by staying educated, you can be the push towards change that will help inspire and vocalise other people as well.

With the help of social media, word of mouth, and various other ways of communicating, people can be made more aware of these ‘behind the scenes’ sorts of scams that even a person with a keen eye would overlook.

So, let us all stay educated to steer clear and help others steer clear of such dishonest acts.

For more information, visit the NPCI website.

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