LIC Charges For Paying With Debit Cards

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The RBI wasn’t happy about merchants charging for debit card payments, and in a statement recently, had told banks to cut relationships with merchants who paid through debit cards.

Yet, when you attempt to pay an LIC Premium online, through a debit card, here’s what you see:

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Incredibly, if you pay through netbanking, there is no charge!

It’s not a heck of a lot – a Rs. 12+ST charge on a Rs. 10,000 transaction will cost you less than the time it takes for you to complain about it. But it’s the concept – of charging for what has been regulated to be free – that counts.

RBI needs to goad banks to take action. Banks charge this fee to LIC when they use debit cards and the Visa/Mastercard framework. LIC then charges that fee over to you. They will tell you that it costs them money.

However any payment mechanism has a cost. Cheques will bounce or have some errors in them. Cash has a handling cost (keeping change, taking back/forth to banks to deposit, ensuring there is no pilferage). Even netbanking payments will cost LIC something. In that context, it’s not entirely clear why they want to charge customers for payments on credit or debit cards, when they can easily absorb the cost.

Additionally, debit cards needn’t even hit the Mastercard/Visa framework – they should be connected only through RBI and NPCI’s Rupay networks, therefore not giving them any money (and saving costs for consumers).

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What RBI should be doing is: telling banks to remove LIC as a merchant unless it absorbs debit card costs. But as we’re seeing, the punishment is only for small merchants. When a big company like LIC does bad things, they all look the other way.

21 COMMENTS

  1. HDFC charges for paying online; other Retailers charge for Debit/Credit card swipe; Hospitals do so too. This is nothing new and infact has grown in the past decade. It actually looks as if Plastic should not be used is the mantra

    • Wow. I can understand credit cards (since they charge the merchant higher for potential default etc)

      But debit cards typically don’t have that kind of cost (any debit made before a complaint is registered is a customer’s problem, not the bank’s, etc.). There is no default cost – if the money isn’t there in the customer’s account, the transaction is rejected. Plus, the whole back end is now NPCI (i.e. all banks are interlinked to a single network, which is why you can use any bank’s ATM anywhere else).

      It’s really sad that there’s not enough banks to provide compoetition.

  2. Deepak, the same thing applies to Bangalore one (online or at their centres) as well, when we pay any of the Bills – Electricity, Telephone etc. When I asked the guy at the centre (obviously, I didn’t expect him to be aware of the RBI rules), he simply said the charges are in the system and he can’t do anything about it.

      • I meant to add – Lots to improve in terms of how these things are enforced. I just hope it’s done in quick time. Else, guys like you and me will keep getting charged by these guys. And there are many who are not even aware of such rules – they are getting fleeced !!

  3. Now loading money through credit card for “Airtel money” has convenience fee.Netbanking free though. Earlier debit card# could be passed through as credit card.

  4. Buy a flight ticket from makemytrip and at the last moment they tell you there is a “convenience fee” of some 200 bucks (forgot the exact amount) if paying using debit card.

  5. Even Indian Railways (www.irctc.co.in) as well as every PSU petrol pump does it. Generally speaking most of the government related services (even passport) charge more if using any mode other than Netbanking. These providers have monopoly and don’t see much value in delighting customers.

    Its also strange that there are NO cheque clearance charges (which certainly has manual operations and associated costs), but NEFT, RTGS transactions which are fully automated are charged.

    Having rules doesn’t matter. Their implementation makes the difference. Let’s hope Raghuram Rajan looks at these seemingly minor, but customer attitude/trust/feel affecting things. Also let’s hope that more of us (including me) start officially complaining about such seemingly trivial things (for trivial amounts) to the authorities so that they can show that it’s not a battle between RBI and other entity but between customer and service provider.

  6. For those who are getting this error “Premium can not be collected through this channel.Please contact LIC branch for the premium payment.”

    The explanation from the LIC web page is:

    Kindly check the following: a. Premium can be paid 30 days in advance from the due date. e.g if due date is 15/10/2013, premium will be accepted only from 16/09/2013 onwards (provided the due date is in the same financial year). b. If the policy is in lapsed condition, online payment cannot be made. For revival of the same, please contact the nearest branch for guidance.

  7. I have a question on the service tax.

    LIC premium = 20000.00 – A
    Convenience fee = 35.00 – B
    service tax = 12.36% – C

    service tax will be calculated on LIC premium + Convenience fee (A+B) or on only B. i,e
    case 1: 20000+35 = 20035. service tax = 20035 x 12.36% = 2476.32
    case 2: service tax = 35 x 12.36% = 4.326

    Please tell me the service tax is Rs 2476.32 Or Rs 4.236 ?

  8. Hi all,
    I have paid my premium thru hdfc debit card and the charges were rs13.48 only. Premium was 25,319 and what I had to pay was 25,332.48.

  9. work loadb of the insurance companies is reduced as payment is done online. so they should not charge additional charges. the system is beneficial not only to the customer but also for the insurance companies. so insurance companies should think regarding this.

  10. Original Amount INR 25221.00

    Fee Amount INR 35.00

    Service Tax Amount INR 4.33

    Total Fee Amount INR 39.33

    Final Payment Amount INR 25260.33

  11. Hi All ,

    This is Parth Doshi from Atos, one of the transaction processing company who host LIC transactions through IDBI Bank .

    Just to clarify all ,
    CC Additional FEE : Rs.35 + 12.36% ST ( ST will be applicable on convenience fee of 35 Rs.)

    DC Additional FEE : 0.75% + 12.36%ST (for amount 00-1600.00 and ST will be applicable on convenience fee of 0.75%)

    DC Additional FEE : Rs.12 + 12.36%ST (for amount 1600.01-Onwards and ST will be applicable on convenience fee of 12/-)

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