Home / Money / Personal Finance /  Rent paid through ICICI credit card to attract 1% fee

“Dear Customer, starting 20-Oct-22, all transactions on your ICICI Bank Credit Card towards rent payment will be charged a 1% fee." 

Do you own an ICICI credit card and have received such a message? It is meant for cardholders who use their credit cards to pay house rent through platforms like Cred, RedGiraffe, Mygate, Paytm and Magicbricks, among others. 

So far, no fee was being levied by any bank or credit card company on such transactions. ICICI bank is the first to introduce a fee on rent payments done through its credit cards and others are expected to follow. 

What did you pay so far

Tenant adds the landlord’s bank account details or UPI (Unified Payments Interface) address under the recipient option on the platform and completes the transaction with his credit card. 


Platforms facilitating such transactions charge a convenience fee of 0.46-2.36% on each transaction. This convenience fee acts as a substitute to MDR (merchant discount rate) that online platforms charge merchants for using the user’s card services for accepting bill payments. Since the merchant in the rent payment feature is the landlord, who will not pay a fee for receiving rent, platforms charge users paying rent in the form of transaction fee.


The 1% fee charged by ICICI bank will be in addition to the transaction fee that online platforms impose. 


Why this fee


While the bank has not labelled the fee that can ascertain the reason for it being charged, it could be a way to curb the misuse of rent payment feature for credit rotation. 


Industry experts have pointed out that customers add their family or friends as landlords on these platforms and transfer money in their bank account to convert it into cash at no extra cost. Fee to withdraw cash from an ATM using credit card ranges from 2.5-3% of the amount withdrawn.


Rent payment through credit card feature can be misused easily as all online platforms offering this facility, barring RedGiraffe, do not ask for rent agreement to validate the genuineness of the transaction. 


“This fee is introduced to stop credit rotation through bogus rent payments. In the past banks have introduced surcharges of 0.25-1.8% on train ticket booking and fuel payments done through credit cards to repress similar practices" said Kashif Ansari, assistant professor, Hansraj College, University of Delhi.


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