Unlike debit card transactions, the Reserve Bank of India does not prohibit surcharges on credit card payments. This practice is governed by agreements between merchants and payment providers, but transparency is mandatory. Consumers have the right to dispute unexpected or undisclosed fees with their card-issuing bank or the RBI Ombudsman if a merchant fails to provide clarity before a payment is finalized.
Confusion frequently arises at payment terminals when shoppers are asked to pay an extra fee for using a credit card. While many believe this practice is universally banned, the reality is more nuanced. The Reserve Bank of India strictly prohibits merchants from passing on the Merchant Discount Rate—the fee businesses pay to process card transactions—for debit card payments. However, the central bank has not implemented a similar blanket ban for credit card transactions.
The Contractual Nature of Surcharges
Because there is no central prohibition on credit card surcharges, the legality of such fees often depends on the specific agreement between the merchant, their acquiring bank, and the card network. When a business chooses to levy a surcharge, they are effectively shifting the processing cost from their own balance sheet to the customer. This is distinct from convenience fees, which are typically charged for specific services like online utility payments or ticketing. Under existing payment aggregator guidelines, any additional charge—whether labeled as a convenience fee or a surcharge—must be disclosed with complete transparency before the consumer authorizes the final payment. Merchants who fail to display these costs before the PIN entry stage are generally in violation of standard payment guidelines.
Consumer Recourse and Disputes
If a customer encounters an unexpected fee at the point of sale, questioning the merchant is the primary step. If the explanation is not satisfactory, or if the fee was hidden, consumers maintain the right to dispute the transaction directly with their card-issuing bank. As of the current regulatory framework, if the card issuer fails to resolve the grievance within 30 days, customers can escalate the matter through the Reserve Bank of India’s Integrated Ombudsman Scheme. This platform provides a formal channel for raising complaints regarding unauthorized or poorly disclosed charges.
The Shift Toward UPI
This ongoing friction over credit card costs is one of the drivers behind the growing merchant preference for the Unified Payments Interface. As digital payment adoption scales, businesses are increasingly incentivized to shift away from card-based transactions to minimize their overhead. UPI transactions remain free for consumers and offer significantly lower processing costs for merchants, making it a more efficient channel for many small and medium-sized businesses. For the average shopper, this changing environment means that checking the final bill amount for any appended, undocumented charges before finalizing a transaction has become a necessary financial habit.