Several banks will begin charging an additional 1% fee on May 1, 2024, for all utility payments made using their credit cards.
Alongside the current practice of collecting fees for rent payments made using credit cards, there is also an additional charge.
Changes impacting credit card customers—especially those paying electricity bills—were announced earlier this month by Yes Bank and IDFC FIRST Bank.
Clients of Yes Bank would have a free use limit of Rs 15,000 under the most recent restrictions, while clients of IDFC First Bank will have a little higher limit of Rs 20,000.
That is, there would be no additional fees if the utility bill payment for a Yes Bank credit card member is less than Rs 15,000 throughout the course of a statement cycle.
Yes, the Bank has made modifications
'Private' credit card types are not affected by the revisions to some credit card charges made by YES Bank.
The revisions mostly affect the category of fuel expenses on particular credit card kinds, as well as the computations of the spending thresholds that waive annual and membership fees.
Furthermore, beginning of March 29, 2024, all utility transactions during a statement cycle will be subject to an additional 1% tax, per the YES Bank website.
IDFC First Bank's declaration
A 1% tax + GST would be applied by IDFC First Bank on credit card payments for utility bills that exceed Rs 20,000. LIC Classic Credit Card, LIC Select Credit Card, and FIRST Private Credit Card customers are exempt from this fee.
The bank made it clear that there would be no penalty if electricity bill payments stayed at Rs 20,000 or less over a statement cycle. In addition to the 1% fee, 18% GST will be applied on bills over Rs 20,000.
Explanations for the 1% charge increase
There are two primary reasons why banks are introducing these fees.
First off, compared to other purchase categories like groceries or travel, the Merchant Discount Rate (MDR) for energy bill payments is usually lower. Banks receive less money as a result of credit card transactions including utility purchases.
Secondly, banks aim to discourage possible commercial abuse of personal credit cards for large electricity bills.
Banks hope to keep their reward programs for personal credit card customers viable without jeopardizing their financial security by putting on extra costs.
