RBI Bans Rent Payments via Credit Cards on Paytm, PhonePe, and Cred: What Tenants Need to Know

If you have been using apps like Paytm, PhonePe, or Cred to conveniently pay your monthly house rent via credit card, that option is no longer available. The Reserve Bank of India (RBI) has issued new rules that have forced fintech companies to suspend rent payment services through credit cards.

This move comes after the central bank raised concerns over Know Your Customer (KYC) compliance, misuse of transactions, and the lack of direct merchant agreements between payment platforms and landlords.

Why Has RBI Stopped Rent Payments Through Credit Cards?

In its latest circular, RBI clarified that payment aggregators (PAs) and payment gateways (PGs) can only process transactions for merchants with whom they have a direct agreement and completed KYC verification.

Since most landlords are not registered as official merchants, fintech apps are no longer authorized to process rental payments on their behalf. RBI also highlighted that in many cases, these transactions bypassed the full verification process. This allowed individuals to transfer money under the guise of rent to personal accounts, which was later used for non-rental purposes—a loophole that concerned regulators.

Why Were Rent Payments via Credit Card So Popular?

Over the last few years, paying rent through credit cards gained immense popularity in urban areas. The trend picked up due to several key benefits:

• Reward Points & Cashback: Large monthly rent payments translated into attractive reward points and cashback offers.

• Interest-Free Credit Period: Tenants enjoyed additional financial flexibility by leveraging the grace period on credit cards.

• Convenience: Fintech apps made rent transfers seamless, quick, and hassle-free compared to traditional methods.

For many, this became a smart financial strategy to earn rewards while managing monthly cash flow more effectively.

Banks Had Already Tightened Rules Before RBI’s Move

Even before RBI’s recent announcement, several leading banks had already started restricting rent payments via credit cards.

• HDFC Bank notified customers in June 2024 that payments made through fintech apps would attract a 1% fee, capped at ₹3,000.

• ICICI Bank and SBI Cards stopped offering reward points on rent payments made through credit cards.

• By March 2024, platforms like PhonePe, Paytm, Mobikwik, Freecharge, and Amazon Pay had suspended this facility, though some temporarily resumed it after updating KYC processes.

What Does This Mean for Tenants?

The new RBI rule will significantly impact millions of urban tenants who relied on credit cards for rent payments. Without this option, renters will now have to switch to alternative methods such as:

• Direct Bank Transfers (NEFT/RTGS/IMPS)

• UPI-based transactions

• Traditional payment methods like cash or cheque

While these methods remain functional, they eliminate the reward benefits and credit flexibility that tenants previously enjoyed with credit cards.

Expert Take: A Push for More Secure Transactions

Financial experts believe that while this rule may cause inconvenience for some tenants, it ensures better transparency and compliance with KYC norms. By tightening regulations, RBI aims to minimize misuse of credit cards for non-rent transactions disguised as rent transfers.

However, fintech players may explore alternative compliant frameworks to reintroduce such services in the future, provided landlords are brought into the formal merchant ecosystem.

Final Word

The RBI’s decision to ban credit card-based rent payments through apps like PhonePe, Paytm, and Cred marks the end of a widely used convenience in urban India. Tenants will now have to adjust to other payment methods, but the move reinforces the regulator’s focus on security, compliance, and accountability in digital financial transactions.

For now, those accustomed to earning cashback and reward points on high-value rent payments will need to rethink their monthly expense strategy.