Starting January 1, 2017, Banks have begun charging the transaction cost for every transaction made with debit cards. In a bid to push demonetisation and digital payments, Government back in November waived off the service charge on all debit card transactions, however, service charges on credit card transaction remained unchanged.
A service charge up to 1% will be levied on debit card transactions, 0.25% will be charged for transactions up to Rs. 1000 and 0.5% will be charged for transactions between Rs. 1000 and Rs. 2000 and 1% for transactions above Rs. 2000.
RBI with collaboration with public sector and private banks (not all banks participated) made this arrangement to waive the service charge for transaction made through debit card until December 31, 2016. However, there have been several controversies with banks charging users without their knowledge and for no reason several times.
The Merchant Discount Rate (MDR) is the charge paid by the user to the banks for using debit cards for transactions. This has been the major factor deterring the adaptation of a PoS machine at the small retail stores. With the charge waived off, several kiosks would adopt to the digital payments.
Since Government insisting people to go towards cashless payments, these charges should be pulled so that people might start using debit cards and credit cards for transactions.