Now pay two per cent fee for recharging your Paytm wallet via credit cards

Move comes to tap merchants who exploited the loophole to gain credit points

Ever since demonetisation, people have been looking for ways to bypass the digital transaction fee they have to pay. 

Targeting the small merchants, Paytm had, in November, introduced zero per cent platform fee, to encourage them to accept payments through their wallet during demonetisation. However, merchants used this facility to add money to the wallet and transfer it back to their linked accounts without paying any transaction fee. This was costing Paytm a hefty amount. Also, adding money to the Paytm wallet though credit card gives credit points that can be used to buy goods. People used this loophole and earned plenty of points. 

" We saw a disturbing trend when many users started funding their Paytm wallet with their credit cards and transferring it to the bank all for free. They were not only getting free loyalty points which effectively is free cash but also getting access to free credit," Paytm said in a blog.

In the wake of this situation, Paytm will now levy a two per cent fee for adding money to the e-wallet using credit card. However, it will give an equal amount of cash back for using credit card to add money in the wallet. The cost of adding money to the wallet through other modes such as net banking and debit cards remains non-chargeable. 

This fee came into effect on Wednesday.

In a blog post written on Wednesday, Paytm said, "Paytm pays hefty charges when you use your credit card at card networks and issuing banks. If a user simply adds money and takes it to the bank, we lose money." 

Merchants processing credit card transactions, in this case Paytm, pay a fee for interbank settlement of the payment, known as merchant discount rate which could be as high as three to four per cent. Credit card users transacting on the Paytm marketplace, booking tickets and paying utility bills on the platform will not be charged the said fee. 

"There will be no fee when you shop on Paytm or pay for any utilities using your Credit Card or any other payment option but to avoid the misuse highlighted above, we will put 2% fee (inclusive of taxes) only on adding money to wallet using credit cards while adding money using any other payment option remains free. However, this 2% fee charges on credit card would be reversed in the form of a discount coupon for same amount which will be issued within 24 hours of adding money effectively giving you this fee back. This hopefully keeps unintended misuse of our platform away and as a consumer you still enjoy our services at no extra cost," said Paytm.