Fuel surcharge levied on petrol pumps: 3 things to know while using debit/credit cards

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Updated: January 9, 2017 7:02:34 PM

In a bid to promote cashless transactions post demonetization, the government had waived various tax surcharges levied on credit/debit cards for fuel purchase. However, as banks wanted to impose 1 percent charge on transactions made through debit/credit cards, the Petrol Pumps Association had decided not to accept debit and credit cards from today.

Fuel surcharge levied on petrol pumps, cashless, Ministry of Finance, MDR, ATM, CIBIL, bills, Interest, Debit cards, prepaid cards while credit cards, co-branded cards.To promote cashless transactions, banks charge MDR to enhance the use of credit and debit cards.

In a bid to promote cashless transactions post demonetization, the government had waived various tax surcharges levied on credit/debit cards for fuel purchase. However, as banks wanted to impose 1 percent charge on transactions made through debit/credit cards, the Petrol Pumps Association had decided not to accept debit and credit cards from today.

Although petrol pumps across the nation have now decided to postpone until January 13their protest against the banks’ decision to levy an extra charge on card transactions, but nothing is certain for now.

Whatever be the case, here are three things you need to know while using your debit/credit card:

What is merchant discount rate (MDR)?
To promote cashless transactions, banks charge MDR to enhance the use of credit and debit cards. The discount rate varies from merchant to merchant as per the volume of business transactions, the average ticket size or sales per transaction, etc. Banks provide these discount rates after signing a mutual agreement with the merchant.
Generally, the discounts offered to them ranges between 0.75 percent and 3 percent. It can be changed anytime as per the regulations imposed by the Ministry of Finance. MDR rates differ for debit and credit cards.

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Why did banks decide not to use debit or credit cards?
Banks have now decided to charge 1% on all credit cards and from 0.25% to 1% on all debit card transactions done at petrol pumps. Since this decision will result in wiping out the profit margins of the Petrol Pump’s Association, they are preferring to take cash.

Difference: Debit Cards Vs. Credit Cards
Debit cards are mainly used to withdraw cash from ATMs. These cards are directly linked to your bank account. You can withdraw money 24×7 from any ATM irrespective of the bank account through which your card is linked.
Credit card, on the other hand, provides the credit limit which is offered by the bank to the customers on the basis of credit score maintained by CIBIL. These are interest-free loans given to a customer over and above their income.

A debit card does not provide any reward point per transaction while on every transaction we get reward points through credit cards. However, if any bank is providing a cash back scheme, it can be applied on both the cards as per the bank’s terms and condition.

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Proper bills are generated on the usage of credit cards where you can track all your necessary transactions done before paying the bill. On the other hand, while using debit cards, no such bill is generated. You only get an instant message of payment. However, you can take the mini statement from the ATM machine to know your transaction or else net-banking users can easily track both the records of credit and debit card through e-banking account.

Interest is charged on the credit card if the bill is not paid on time while in the case of debit card no interest is charged because the debit card has nothing to do with the borrowings.

Debit cards have may variants to cater to the needs of customers. They come up in the form of prepaid cards while credit cards come up with various variants of co-branded cards.

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