This festive season, play your cards right

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RBI has banned zero per cent interest EMIs and has put ‘ifs and buts’ in credit cards transactions. RBI has banned zero per cent interest EMIs and has put ‘ifs and buts’ in credit cards transactions.
SummaryIf shop-till-you-drop is what festivals entail for you, get ready to spend hard cash this time.

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,” the RBI says.

“Such fees 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,” the RBI said. Some outlets, especially fuel stations, are still charging a fee from customers who use debit cards.

According to the Damodaran panel report, the percentage of interchange/ merchant fee charged by the card service providers for both debit and credit card being the same, a merchant is indifferent to a credit/debit card. Card data indicates that more than 80 per cent of the cards are debit cards and the customers feel that debit card is akin to cash as it directly debits their accounts and does not confer any advantage by way of a credit facility.

Customer feedback indicated that if the merchant service fee is made minimal for a debit card, it might encourage its acceptance by the merchant establishments and thereby encourage electronic payments.

Card service providers and banks should therefore follow a differential merchant fee policy in favour of debit cards which will, over a period of time, reduce the dependence on cash for payments.

New norms

* Banks and card companies can not offer zero percent EMI schemes on credit card outstandings as the interest element is often camouflaged and passed on to customer in the form of processing fee

* Banks will have to bear the cost of fraudulent card transaction through point of sales at merchant establishments that do not have security features prescribed by RBI

* Banks will have to terminate relationship with merchant establishments which levy a fee as a percentage of the transaction value as charges on debit cards of customers saying such fees are not “permissible and justifiable”

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