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Credit card transaction fees: Your responses
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November 30, 2007

Last week, we asked our readers to share their experiences about paying credit card transaction fees. Well, we were flooded with a ton of responses from credit card users as well as the merchants! Here, we present their cases!

I have experienced this. Merchants say that they have to pay rent for the EDC machine and/or processing fee. More than the customer, it is merchants who put their foot down, demand & finally win.

Every credit card (CC) holder should be aware of CHARGE BACK; the only protection for customers.

What is 'charge back' and how does it work?

If a customer is unhappy with a purchase thru CC, s/he can demand for 'charge back' so that banks will reverse the amount billed on CC. That is, bank will cancel that purchase & will not pay the amount to merchant. Net result is customer need not pay for that faulty product or unsatisfactory purchase. The charge back can be claimed within 180 days of the purchase date. Does any bank educate customers of this fact?

When the MOTO (Mail Order / Telephone Order; a.k.a MOPO-Mail or Phone Order) was in practice without the CVV number, a merchant charged my brother for an unwanted holiday package. After noticing the charge in the statement we demanded the bank for charge back successfully.

Next time when merchants demand a 2% transaction fee to be paid by me, I would like to ask them to bill it separately and collect a receipt for the same. Later go for charge back.

Last but not least, I do not think banks are bothered as long as they get the transaction fee; whether it is paid by the merchant or the customer.

                                                                                                                                                          -- eCommon Man

Yes, the merchant establishments charge a fee if you tender a credit card. They say take it or leave it. The issuing bank does not help the customer and holder of their credit card.

This is because the legal system in India is soft and complaints are literally unaddressed.

The establishments do not sell at below MRP even if you specifically request. The GoI itself had issued ads in this regard.

About petrol, the banks tie-up with one company and force you to buy from that pump, otherwise, they charge a fee. This is wrong but the authorities do not step-in.

Since we are in India the retailers and banks hold us at their mercy. No retailer can refuse to sell goods to a customer. The fight has to be waged by us, customers. Customer is no longer the KING in India.

                                                                                                                                                            -- Geeta Ramani

Once, I purchased a mobile. The shopkeeper asked for 2% extra. I told him I would be back with the cash. On hearing this, he relented and gave it to me without extra charges. This was my best experience. However, on other purchases, I have had to negotiate for 1% extra instead of 2%.

My worst experience was when I intended to purchase a Tata Sky card worth Rs 1000. The shopkeeper said 2.5% = 25 rupees extra. I told him -- you give 10, I will give 15 rupees. He spoke quite roughly -- hum kyon den? I told him it was because he was supposed to pay the bank, not I, and that I was doing him a favour and not the other way round.

He said he did not earn anything from the transaction. Anyway, I did not give in. I didn't purchase from him and purchased the same from Indiaplaza instead online without any transaction fee.

                                                                                                                                                              -- Kaushik Das

I personally feel that every individual who has cc is aware of this. Because at the time of purchases the establishment warns you that the transaction fee will be charged. At that time we should protest for the same and cancel the purchase. If everyone will start doing that then only this practice will stop. Normally person is having an ego that other person is looking at the same.

I always protest and cancel the purchase. Normally this happens with me in jewellery shops. And stop buying from them.

Everyone should stop buying the goods and services from the establishment who charges the transaction fee

                                                                                                                                                        -- Harshad Sanghvi

I just wanted to buy Nokia N95 some times back. When I went to a big showroom, they asked me the retail price of 27K (off course they were happy, even though if I was paying through CC). The same N95 I bought from a small shop at 25 K only but yes, He was sure to take 2% on 25K when I proposed to pay from my CC.

It's always a good deal to bargain on cash price and not just swipe in your card. After all, it's you who is gonna pay the money back.

I have never paid any transaction fees till date. (I am using credit card for the past 4 years). If any merchant establishment asks me of charge, I refuse to buy from those merchants. Then they will waive the transaction fees. Or else I simply walk out to a different merchant.

                                                                                                                                                              -- Simanta Das

Most of the industries do not charge transaction fees, be it garment stores, hotels and restaurants, Airlines, hospitals. However some of the industries where the margin is low like travel agencies (they earn 5%, discount by 4% and get a profit of only 1%, if they absorb the transaction fee of 2.5%, they will go in a loss).

Petrol Pumps (they only get less than 1%, if they absorb the transaction fee of 2.5%, they will go in a loss).

Consumerism has become so rampant that exploiting businesses has become the sole contention of buyers. If retail businesses fail, it will have a wave effect on employment and affluence of consumers, just like sub-prime in US has an effect on Indian Stock exchanges.

This is complex economy structure, which I have no time to explain at this hour.

                                                                                                                                                           -- Gagan Chadha

Many up market establishments do not charge a transaction fee because this cost is loaded in the price to the customer. There are other merchants, operating at low margins and believing in cash purchases. These people charge a transaction fee on purchases by credit cards. They keep the card swapping machine mainly to attract prospective buyers of large value purchases.

The transaction fee is thus waived if a large amt purchaser objects to it and charged to the small value purchaser of low value items to force cash purchases. The transaction fee is thus used in a discriminatory manner by some merchant establishments. If a customer persists then these merchants also say that they do not accept so and so credit card; etc. Such a practice was common with the older Diners Card.

It is for the buyer to decide whether to patronise such establishments or not. In the meanwhile the credit card companies can make a list of those who charge transaction charges and make public announcements in the name of fair business practices. Singapore tourism regularly publishes lists of shops which overcharge their customers or avoid paying sales tax or sell cheap and unreliable goods or indulge in discriminatory practices.

                                                                                                                                                             -- Ravi Prakash

My car repair company has boldly put up a notice on the cash counter "all payments by credit card will be charged 2.5% extra." Both Mastercard/ Visa and the issuing banks might claim this charge is illegal. Can they come out with clear cut procedures on how a consumer should confront such situations or a website-id where such com- plaints can be recorded? Meanwhile, the wrong- doers continue to make hay.

                                                                                                                                                                 -- SS Kumar

I am a merchant myself and also a credit card holder, so I know both sides of the story. When ever we visit an electronic showroom for eg to buy an electronic gadget like TV, CD player, mobile etc. the shopkeepers margins are too low and in many cases as low as 1%, whenever he swipes a customers credit card, 1.5% to 2 % is deducted by the bank from the bill amount, so if he doesn't charge this extra amount how will he make any profit?

But in many cases like restaurants, hotel, and place where the margins are very high as high as 50% in most cases they don't charge in extra, but some greedy merchant don't want to leave that 2% from their own pocket. There should be a mutual understanding between the customer and the merchant, some have to charge extra and some can do even without charging extra 2% on the amount swiped.

                                                                                                                                                             -- Zafar Ahmed

Why do credit card co. charge a hefty 1.5% to 2.5% transaction fees from sellers. I know of an instance when I purchased a low-cost air ticket from a travel agent for Rs. 2500/- , he asked for 2 % extra transaction fee, on my reluctance to pay the transaction fee, he showed me the calculation that he had received.5% of basic fare i.e., Rs.1200/- coming to Rs.60/- as commission & he had to pay Rs.50 i.e.2% of Rs.2500/- as transaction fee, finally left behind with just Rs.10. I think he was justified in charging transaction fee from me when he had very low margin.

Profit margin day by day decreasing...even credit card co. should charge smaller percentage. Credit card consumers should not forget the lucrative gifts given by card cos. are paid out of this transaction fee. Which in turn is forced on traders & finally consumers bears the brunt.

                                                                                                                                                          -- Sourav Agarwal

Charging of transaction fee on the use of credit card is not only unhealthy but cheating with the customers as well. Most of us are unaware that these charges are to be borne by the seller only. Credit card is a facility offered by various companies to which the sellers are also the member and as a mean to promote their sale volume even they offer the service.

Perhaps there is no law to control this practice and even the institutions offering credit cards are casual in their approach in such cases. Strict control and vigil plus awareness programme should help.

                                                                                                                                                          -- Neeraj Agarwal

Well, the Govt. intends to reduce cash transactions and encourage plastic card. This would help to curb black money and tax evasion. It is often seen that the policies of the Govt. are rather retrograde and not progressive.

Take for example, transaction charges in the Bank. If you are maintaining Current Account, and intends to draw cash more than Rs.50,000/- Income Tax Dept. instructed Banks to levy and collect Bank Tax and credit to Govt.Account. This step would discourage to open Bank Accounts.

Further, I have been using credit card and while booking railway tickets, additional charge is levied by the railways; these are required to be eliminated. Who hears common man\'s voice. On the other Members of Parliament,MLAs when they receive enormous amounts by way of allowances, they are all exempt from Income Tax.

A strange logic! The cmmon man\'s genuine grievance shall never be heard and redressed. The Consumer Councils are also like civil courts drag on and justice delayed and no one has patience to pursue. Enforcement of rule of law if not done average citizen in the counrty would always feel frustrated.

                                                                                                                                                  -- Radhakrishna Wudali

Many people have said that they have not been charged. It's simply because off late things have been changing. These card companies have been tying up with more merchant establishments and charge less, due to competition. Instead of charging merchant/customer they charge membership fee from banks, or from customers having special cards like cash back, miles, etc.

Basically the bank benefits on less transaction costs if we use the card (debit or credit), because the transaction cost of withdrawing money and paying or via cheque would be higher. Now you know why banks advertise, educate and encourage customers to use their debit card, because there are inherent benefits to them.

It's better to get wise on use of credit cards, because as long as you pay your bill without rollover it's fine, but just one delay and if you run out of cash another time, interest and charges start pouring in.

                                                                                                                                                                      -- Chinku

Paying transaction fees on your credit card? Post your comments on the message board below!

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