Credit Card: Reserve Bank may soon ban some types of payments through credit cards. After RBI expressed concern, banks have also ended the discounts and cashback available on such payments. After all, what are those payments on which RBI is keeping an eye?
Credit Card payments Update: The use of credit cards is continuously increasing in the country. According to the Reserve Bank of India (RBI), around Rs 1.5 lakh crore was paid through credit cards in the month of February alone. There has been a growth of 26 percent on annual basis. In this payment, a large amount is related to rent payment, tuition fees, vendor payment and maintenance of the society. In the last few years, people have started using credit cards more for this type of payment.
The Reserve Bank actually has a problem with this type of payment. He believes that the credit card is designed for the individual to make payments to the merchant. Due to this, person to person payment cannot be made. RBI has objected to such payments and it is also being speculated that soon options like rent payment, vendor payment and tuition fee payment through credit card will be stopped.
How is it used?
In the last few years, many such fintechs have come into the market, which provide the option of paying rent and society maintenance charges through credit card. For such payments, an escrow account of the fintech credit card holder is opened. Money is transferred from the card to this escrow account and then that money is transferred to the bank account of the landlord. For this facility, fintechs charge 1 to 3 percent. There are many fintech platforms including Red Girraffe, CRED, Housing.com, No Broker, Paytm and Freecharge, which provide such facilities.
What are the benefits of paying by credit card?
There are many benefits of paying rent, tuition fees and maintenance etc. through credit card. First of all, even if you do not have cash in your pocket, you get a chance of 50 days on this type of payment. Secondly, many credit card companies also offer cashback and reward points. You can also avail discounts through these reward points. Apart from this, some companies also waive the annual fees as per the expenditure limit.
What is the problem with RBI?
The Reserve Bank clearly says that credit cards can be used for person-to-merchandise payments. If there is a transaction other than the customer and the merchant, then the person receiving the money will have to open a merchant account. There is a lot of difference in the rules and standards of both. Therefore it will be necessary to follow it. After RBI expressed concern, banks have also started efforts to stop such payments. Many banks have even stopped giving reward points on rent payment. Some banks have excluded the option of paying rent or tuition fees from the expenditure limit to waive the annual fee. However, we will have to wait for the RBI’s decision to impose a complete ban on it.
