PayTm to levy 2% fee on adding money to wallet using credit cards
Paytm founder Vijay Shekhar Sharma also clarified that the coupons can also be used on third-party sites to pay Swiggy or Uber, although this mechanism has not been activated yet.
In an attempt to combat misuse of its zero-fee transfers, digital payments firm Paytm on Wednesday announced that it will charge a 2 per cent deposit fee from users who top their Paytm Wallet using credit cards.
In its statement, Paytm explained the move saying that savvy users were rotating their cash through the wallet to earn essentially "free" money in the form of reward points. Paytm said that to ensure that genuine users don't lose money, it will return the 2 per cent charge in the form of coupons that can be used on its platform.
Furthermore, Paytm founder Vijay Shekhar Sharma also clarified that the coupons can also be used on third-party sites to pay Swiggy or Uber, although this mechanism has not been activated yet.
Since November Paytm has been allowing users to take cash out of the wallet to their bank accounts at no charge. In its announcement, Paytm noted that typically, cashing out has attracted a fee from wallets. At the same time, Paytm and other wallets haven't charged fees for depositing cash into their systems. This meant that credit card users could fill up their Paytm wallets using the card, then transfer that money back to their bank accounts, at no charge. "They were not only getting free loyalty points which effectively is free cash but also getting access to free credit," Paytm noted.
"Incidentally, Paytm pays the fee to card networks or banks whenever you use any payment instrument like any other online commerce company. Paytm pays a hefty charges when you use your credit card to card networks and issuing banks. If a user simply adds money and takes to bank, we lose money. Our revenue model requires users to spend money within our network and we make money from the margins available to us on various products/services we offer," the statement said.
For this reason, Paytm is now charging a 2 per cent deposit fee from credit card users, and refunding them the same in the form of a coupon that can be used on the Paytm app.
Paytm is applying these charges only on wallet recharges done using credit cards, so if you're using a debit card, net banking, or UPI/ IMPS payments, then you are not affected by this move.