RTGS-NEFT Charges: RBI has announced abolition of RTGS and NEFT charges but the move may not be beneficial for the common man.
Debit-Credit Card Charges: The Reserve Bank of India has abolished the fee levied on online fund transfers through RTGS and NEFT. The decision may not be of much help to the common man as these mode of payments are used mostly by businesses and the upper middle class. Credit and debit cards continue to be the preferred mode of transaction for the common man as the average transaction size for them is in the range of Rs 3,000-4,000.
While the average transaction size for debit card was Rs 3,400 in 2018-19, for NEFT it was Rs 1 lakh and for RTGS payments, the average transaction size was Rs 90 lakh in the last financial year.
A comparison of the charges levied on RTGS, NEFT and Credit Cards and Debit Cards would reveal that the charges levied on the use of ATM-cum debit cards and credit cards are disproportionately higher in comparison with RTGS and NEFT charges.
In case of RTGS, the banks levied nominal charges between Rs 25 to Rs 50 where the minimum transaction size is Rs 2 lakh and average transaction size varied between Rs 70-90 lakh in the last five years.
In case of NEFT, the charges varied between Rs 2.5 to Rs 25 for the transaction amount of up to Rs 10 lakh.
Applicable charges on ATM-cum-Debit Cards
In metro cities, banks provide only three transactions free of cost and in case of non-metro cities, the number of free transactions or use of debit card is just five. Beyond that banks charge Rs 20 plus tax per use. However, these charges vary from bank to bank and nature of account and monthly average balance. Some banks also offer up to five or unlimited transactions on using their ATM cards on their ATMs.
However, most of the banks levy charges beyond free limits and these charges are not only confined to cash withdrawals. These charges are also applicable on balance inquiry, printing of statement, pin change but some bank apply differential charges for financial and non-financial transactions beyond the free limit.
Given the average transaction size which has almost remained the same over the last five years, the levy of up to Rs 20 plus tax appears to be high in comparison with RTGS and NEFT fee where the charges are between Rs 2.5-50.
MDR charges on use of Cards
Merchant Discount Rate (MDR) is the charge that is levied on the merchant by the banks for accepting card payments. A merchant must agree to pay these charges to the banks before he can accept the payments through cards.
MDR charges on use of debit cards
For Transaction less than Rs 500: 0.25% of transaction value (waived of till December 2019).
For Transaction between Rs 501 and Rs 2000: 0.5% of transaction value (waived of till December 2019).
For Transactions above Rs 2000: 1% of the transaction value.
For a transaction of Rs 10,000 at a POS, a customer will be required to pay a fee of Rs 100 for making the payment through debit card.
Credit Card Charges
There are three big lenders, Master Card, Visa and American Express. These companies levy charges between 0.25% to up to 3.5% of the transaction value depending on the nature of transaction.
In case of online, a nominal fee is also added as online use of credit card is considered more risky as it is considered a CNP (card-not-present) transaction and banks are required to cover for any potential loss.
In case of credit card charges levied in the name of merchant discount rate (MDR), these charges certainly act as a barrier in promoting the cash-less economy.
RBI governor Shaktikanta Das has announced setting up of a committee to look into the entire gamut of charges on use of Debit Cards. However, credit card charges and interest rates charged by the credit card companies are not regulated in India.