Paytm to levy 2% fee on topping up wallets with credit cards

Paytm users will now have to pay a two per cent fee for adding money to their wallets using credit cards. The move by the Alibaba-backed company came after it found multiple users using its platform to get free credit by using credit cards to top up their mobile wallets and transferring the money back to their bank accounts at zero transaction cost.

Paytm has started levying the fee from yesterday. However, adding money using other payment options like debit cards and net banking would remain free. "Some financially savvy users (surprisingly many of them employees of national financial institutions) exploited this model to rotate money.

This may surprise normal users like most of us but for a savvy user, it meant freebies at Paytm's cost," Paytm said in a blog post. 

Paytm said it pays "hefty charges" when consumers use their credit card to card networks and issuing banks and therefore, if users simply add money from credit card to wallet and transfer the amount to bank, it loses



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," it said.

To avoid the misuse, Paytm "will put two per cent fee (inclusive of taxes) only on adding money to wallet using credit cards", it added.

Paytm said it would issue a discount coupon for same amount within 24 hours of adding money using credit cards. Earlier this month, Paytm had said it has blocked transactions through some credit cards and had put a transaction engine in place to detect such attempts.

"This will ensure we identify genuine customers and help us serve them better," it had said.

In November, Paytm had introduced zero per cent platform fee targeted at small merchants to accept payments to their wallet after the government scrapped high value currency notes. Paytm does not charge any fee to transfer money from wallets to an user's bank account.