ICICI Bank has over 11 million credit card holders in India. Now in a move that may put an additional burden on credit card holders, the bank has introduced a new charge of one per cent on payment of rent using credit cards. In a message sent to its customers, the bank said, “Dear Customers, starting 20-Oct-22, all transactions on your ICICI Bank Credit Card towards rent payment will be charged at 1% fee.” With this, the ICICI Bank has become the first bank to levy a charge on rent payments using credit cards.
Payment of rent using credit cards
There are various third-party platforms like RedGiraffe, Mygate, Cred, Paytm and Magicbricks that allow users (tenants) to pay rent using their credit cards. However, they charge a certain service fee in lieu of this. All the users have to do is input their credit card details on the platform, then go to the rent payment option and fill in the details like name, bank account number, IFSC code or add the UPI (Unified Payments Interface) address of the landlord and then make the desired payment.
How will this impact credit card holders?
Suppose you pay a rent of Rs 12,000 per month using your credit card, then the platform facilitating the payment also charges you somewhere between 0.4 per cent to 2 per cent. Let’s assume the platform charges you 1 per cent for the transaction, thus the amount that will be deducted from your credit card will be Rs 12,120. Now, when your bill is generated, the ICICI Bank will levy its 1 per cent fee on the transaction (Rs 12,120), thus you will be paying back around Rs 12,241 to the bank. This means the one per cent charge will put an additional burden of around Rs 1,452 per year on the ICICI Bank credit card holders in this case.
Why this charge?
Financial experts say that while several platforms facilitate rent payment using a credit card, there is no mechanism in place to ascertain the authenticity of the landlord (except for RedGiraffe). Thus, the service may be misused by the cardholders as they can make payments to their relatives or friends by adding them as landlords to convert the payment into cash, thus facilitating cash withdrawal from credit cards by avoiding higher charges levied by the banks for the service. Banks charge somewhere around 2.5-3% for cash withdrawals from ATMs using credit cards.
