Paytm will now be charging 2% fee if a user uses a credit card to load money on its wallet, the company informed via a blog post. The digital payments company said that this was necessitated due as many users used credit cards to top up the digital wallet and transferring the money back into their bank accounts at zero transaction cost and getting free loyalty points.

However, Paytm will give the same fee back to users as a cashback if they chose to use a credit card to add money to the wallet. Netbanking and debit cards top ups will continue to be free.

Note that users will the cashback coupon within 24 hours of adding money using a credit card via email and SMS. The company added that users need to add more than Rs 250 using a credit card to be eligible for cashback.  This change applies from March 8th.

However there will be no charge if a user uses a credit card to pay your bills, do recharges or make any purchase on Paytm directly.”There is no credit card fee on transactions done using Paytm in our partner apps like Uber, Zomato, Big Basket, Swiggy and all other Apps that use Paytm Wallet,” it added.

“Paytm pays a hefty charges when you use your credit card to card networks & issuing banks. If 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 company explained.

Meanwhile, Paytm encouraged users to add money to the wallet via UPI and the IMPS.

Parallels with PayPal 

Note that there are some parallels between Paytm charging customers using credits card to load money and PayPal. Back in July 2016, PayPal had been urging customers in the US to use Automated Clearing House (ACH), a network which processes net banking, to load money into their wallet rather than using credit cards. Around the same time, Visa’s chief executive Charlie Scharf said at a conference that he wanted PayPal to stop telling its users to fund their digital wallets through bank accounts. If it continued,  Visa said it would “compete with them in ways that people have never seen before.”

The two companies later arrived at a truce and signed an agreement where PayPal would get certain economic incentives, for increased Visa volume, and greater long-term certainty on fees paid to Visa, and removes the threat of any fees or Visa network rules being targeted solely at PayPal. PayPal also has a similar deal with MasterCard in the US.