Beginning May 1, 2024, several banks will implement an additional 1% fee on all utility payments made using their credit cards, in addition to the existing practice of charging fees for rent payments via credit cards.
Earlier this month, Yes Bank and IDFC FIRST Bank announced adjustments affecting credit card customers, particularly those making utility bill payments.
Under the latest regulations, Yes Bank customers will have a free usage limit of Rs 15,000, while IDFC First Bank customers will enjoy a slightly higher limit of Rs 20,000. This implies that as long as a Yes Bank credit card holder's utility bill payment remains below Rs 15,000 during a statement cycle, no additional charges will apply.
YES Bank's updates primarily affect the fuel fee category on specific credit card types, along with changes to the spending threshold calculations for waiving annual and membership fees. Additionally, a new 1% charge will be imposed on all utility transactions within a statement cycle, according to the YES Bank website as of March 29, 2024.
Meanwhile, IDFC First Bank will levy a 1% surcharge plus GST on credit card payments exceeding Rs 20,000 for utility bills. However, this surcharge does not apply to certain credit card holders, including those with FIRST Private Credit Card, LIC Classic Credit Card, and LIC Select Credit Card. If utility bill payments remain at Rs 20,000 or below within a statement cycle, no surcharge will be applied. For bills exceeding Rs 20,000, an additional 18% GST will be added to the 1% surcharge.
The rationale behind the introduction of these fees by banks stems from two main factors. Firstly, the Merchant Discount Rate (MDR) associated with utility bill payments is typically lower compared to other purchase categories such as groceries or travel, resulting in reduced revenue for banks from credit card transactions related to utility payments. Secondly, banks aim to discourage the potential misuse of personal credit cards by businesses to cover significant utility expenses.
By implementing these additional fees, banks aim to maintain sustainable reward programs for personal credit card users while ensuring their financial stability.
