India News : Credit cards have long been associated with rewards and points, which is why many people prefer to pay their rent using this method. However, because card issuers have begun restricting such payments to prevent misuse, it may no longer reward the tenant as it used to.
ICICI Bank cardholders will be charged a 1% fee on rent payments beginning Thursday, October 20. From November 15, SBI Card will charge a processing fee of Rs 99 (exclusive of taxes) on rent payments. While HDFC Bank, India’s largest private lender, limits reward points from rent payments to 500 points, Yes Bank limits such transactions to twice a month.
While credit card companies did not provide a reason for charging fees or limiting the number of transactions, a banker stated that restrictions are in place because these payments may not be legitimate. “Because there is no verification of beneficiaries, people are using these services to transfer money to friends and family members instead of landlords,” a banker told ToI on condition of anonymity.
People can impersonate their friends or family in the name of rent because these are generally high-value transactions that earn more reward points. Furthermore, the cardholder will be able to meet annual spend milestones, which often results in the waiver of a credit card’s renewal fee.
“Cash withdrawals from credit cards are charged by banks.” “However, they are now seeing customers virtually withdrawing cash through loopholes in rent payment services,” an industry participant said.
Though the platforms that enable rent payments charge a convenience fee, experts say it is still cheaper than withdrawing cash from credit cards through ATMs, and that if payments companies acquire landlords as merchants after performing KYC, card issuers should have no issues.