Will the Reserve Bank of India (RBI) decide to restrict Credit Card P2P Payments? Certain types of person-to-person payments, such as rent (house rent), shop rent, society fees, tuition fees, and others, may no longer be possible with credit cards. Let’s find out more details about this.
The number of people using credit cards has been increasing for some time. Many people use them because they receive discounts, cashback, and transaction reward points. Banks are also issuing credit cards more easily than before, and these cards facilitate transactions in lakhs. However, the RBI will make a significant decision on using credit cards. People use credit cards to make various payments, such as purchasing goods, paying rent (house rent), paying shop rent, paying society fees, and paying tuition fees.
However, it appears that the RBI will decide to allow only the purchase of goods with credit cards and will not permit all other transactions, such as P2P payments. The Reserve Bank believes that these transactions violate the existing norms. RBI states that credit cards are intended for payments between customers and merchants, not for person-to-person transactions.
The central bank clearly states that for person-to-person transactions to occur with a credit card, the recipient must open a business account, not between the customer and the merchant. Over the past few years, the use of credit cards has increased significantly in the country. It is estimated that transactions worth around 1.5 lakh crore rupees were made with credit cards in the last month of February 2024. On an annual basis, it has increased by 26%. RBI found that tuition fees, rent payments, and society fees were mostly paid in these transactions.
Many fintech companies have made it possible to pay rent for houses with credit cards. These companies allow payments with 1 to 3% tax. Additionally, as the repayment period is around 45 to 50 days, many people use credit cards for other purposes as well.
Against this backdrop, banks are on high alert due to RBI’s intervention in these payments. Efforts have been made to stop these payments. Most banks freeze reward points on rent payments. Some banks exclude the option of paying rent payments and tuition fees from the spending limit to waive the annual fee. The complete cessation of these transactions is likely to occur soon.
