No-Fee Debit Card Transactions: What it Means For Small Businesses

No-fee debit card transactions
(Last Updated On: June 15, 2021)

Did you know the government has introduced a no-fee debit card policy? This will remove any charges levied on debit card and other electronic modes except Credit card transactions.

To push digital payments in India, Finance Minister Nirmala Seetharaman stated that any business with an annual turnover of Rs.50 crore will not be required to pay the transaction charges on any debit card and other digital modes of transactions, excluding credit cards. This typically means 0% MDR on debit card charges!

What is MDR?

MDR is the rate charged to a merchant by payment processing services on debit and credit card transactions.

How does MDR work? Every time a merchant swipes their card or makes an online payment, the bank charges a fee. The bank deducts a fee while crediting sale proceeds to a merchant’s bank account.

Merchants pay MDR to banks, card payment networks, and other payment service providers for digital transactions.

No-Fee Debit Card Transactions – Good News For Merchants

No-fee debit card transactions are a blessing for small businesses that still use cash for daily payments. With the new rule, you can use debit cards for any amount of payment.

Benefits of Debit Cards for Small Businesses:

  1. The average debit card transaction in India is less than Rs. 150; Accepting debit cards will become as cheap as accepting cash.
  2. The no-fee debit card transaction rule will allow businesses to accept POS transactions.
  3. Most customers have a bank account, thereby having a debit card. This move just means more flexibility for your business to accept online payments.

With over 824 million debit cards issued this year and RuPay cards going international, the Government’s strategy to promote a no-fee debit card rule could work wonders for small businesses.

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