The other side of CARD acceptance by merchants


The credit /debit card usage for shopping in the past couple of years has increased tremendously, the main factor being ease and safety. No more carrying those huge amounts of cash in your pocket or purse, just one card can do it.



With the coming of organized retail in India, this trend of card purchases has seen a triple digit growth.


Nevertheless, there is another side to this so looking easy and safe mode of payment, the retailer’s side.


A retailer or merchant establishment provides a facility for credit/debit card payments; he does it with a point of sale (POS) terminal. Also known as the swipe machines, these devices are installed and maintained by banks and they charge some fees from the merchants for providing this infrastructure. The merchant has to pay certain fees to the bank.


The usage trend of card purchases has now shifted even to smaller towns with almost all banks under core banking. Still you find that some merchants accept cards and few others do not. The main reason being the charge the banks charge for this service. Normally a Commission on the transacted amount is collected by the bank, which ranges from 1% to 2% depending upon the turnover. If your turnover is less you, pay more commission and some times a rental for that swiping machine of Rs.500 per month.


In a city like Belgaum, where still the usage of cards is very less compared to metros, some of these banks set a turnover target of Rs.2 lakh per month otherwise you pay a rental of Rs.500 per month. How could small merchants do a turnover of 2 lakhs only on card purchases.


The best thing many or all do not know is this. The retailer gets no benefit by keeping this machine with him. Look at this, you come and buy goods worth Rs.500 and you give your card for payment. The retailer takes your card and swipes the card gives you a charge slip, you sign it payment done. You are happy shopping but the retailer is not. Why? He just paid a commission of 2% on Rs.500 sale and he will also pay for the local call that the machine made to gather the card info and he will also pay for one more call to settle the transaction, after which the amount would be credited to the merchants account the next day. So on a sale of Rs.500 he looses, Rs.13.20  (11.20 Commission+2 for two local calls) and the money will be credited the next day into his account.


A few merchants when they cant afford to loose this money in this competitive world they started to charge this charge to the costumer; many of you might have paid like this.


The Credit Card Holder’s association of India denounces this practice and makes it clear that  the merchant is not authorized to do this. “In the US, there is a law that the type of payment should not have any impact on the price…

Unfortunately, in India, merchant establishments fall outside the purview of banking regulations,” a senior banker voiced his concern.


Typically, there is a fee a merchant agrees to pay for a terminal. If a merchant tries to recover it from customers, they must walk out.” So, if all this is illegal, what is the way out? A senior banker advises the customer who are asked to shell out this amount, to report such cases to the issuing bank. The bank can then blacklist the concerned outlet and can remove their terminals. Such cases should be reported to a consumer forum, since it is illegal to charge over the MRP for items.


Nevertheless, these banks charge you a rental of Rs.500/month and how is that merchants in non-metros would be able top cope up with this is needed to be seen. In the end, you could also see merchants denying accepting cards for payment. A merchant told this blog that, ” We don’t benefit at all, and now that all banks have their ATMs buyers can withdraw cash an pay us. He also added that these banks charge heftily and by no means, this is a win-win situation for us. Banks need to look at the level of affairs on a local city scale and then device commission structures. Big merchants like malls have a national tie up with banks wherein they get less commission which sole merchants don’t, he added.”


I would request all to comment your experiences in this regard.



  1. Many customers tend to spend more amount if they have credit card than they would otherwise have spent. This is especially common in US and metro cities of India. The retailers may benefit from this higher spending of customers. But, I do agree that small retailers does not profit from credit cards. Its the big retailers that profit from it. Also, customers get 1% or more cash back on all transactions. Those who know this prefer to spend using cards.

  2. Mail received from Mr. SH
    Recently when I was buying some gold jeweley for my wife, the jeweller said he would charge me extra 2% for debit card usuage. He even said this practice is common in all jewellery shops in Belgaum. Other retails shops may not recover these charges but all jewellers do according to him.

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