MUMBAI: Are you paying rent via credit cards to earn more rewards points? It may no longer remain an attractive option as card issuers have started putting restrictions on such payments to prevent misuse.
ICICI Bank cardholders will have to pay a 1% fee on rent payments from October 20. SBI Card will levy a processing fee of Rs 99 (exclusive of taxes) on rent payments from November 15. HDFC Bank has limited reward points from rent payments at 500 points, while Yes Bank has limited such transactions to twice a month.
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In the last couple of years, a slew of fintech companies and property management service startups have promoted services that allow customers to pay landlords using credit cards instead of traditional modes like cheque or netbanking. Some have also sweetened the offer with cashbacks. Card issuers have not provided reasons for levying fees or capping transactions. However, a banker on the condition of anonymity said that the restrictions are being put as these payments may not be bonafide. “People are using these services to transfer money to friends and family members instead of landlords as there is no verification of beneficiaries,” the banker said.
As rent payments are usually high-value transactions, a cardholder would not only earn more reward points, but also be able to meet annual spend milestones that often leads to waiving of a creditcard’s renewal fee.
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“Banks charge a fee for cash withdrawal from credit cards. But now they are seeing that customers are virtually withdrawing cash through loopholes in rent payment services,” an industry player said.
Though the platforms that enable rent payments also charge a convenience fee, it still turns out to be cheaper than withdrawing cash from credit cards through ATMs, experts said. They added that if payments companies acquire landlords as merchants after doing KYC (know-your-customer), card issuers should not have a problem. Earlier, businesses like life insurance companies, which have high-value transactions, have been able to negotiate lower credit card fees (merchant discount rate).
