Effective June 1, 2021, Grab will charge a $ 1 processing fee for all GrabPay wallet top-ups made with Visa credit cards. Does it really matter and how can you avoid it?
Grab recently announced that starting June 1, 2021, there will be a $ 1 processing fee on all GrabPay wallet top-ups made with Visa credit cards.
This fee does not apply to all top-ups of $ 400 or more in a single transaction and does not apply to other Visa credit card Grab transactions such as Grab Rides or GrabFood.
While $ 1 is small by and large, it still represents a significant development as this is the first time the platform has introduced a top-up fee.
If anything, most of the other mobile wallets offer incentives for customers to top up their funds as the funds added are effectively interest-free loans.
Let’s take a closer look at why this change is happening and what you can do to keep getting toll-free top-ups on your GrabPay wallet.
Grab likely pays higher merchant fees to Visa
In February 2020, Visa announced that it would adjust the exchange fees for merchants in the United States. Uninitiated exchange fees are one of the fees that merchants pay for accepting credit cards.
For example, if a merchant pays a 3 percent conversion fee and a customer uses their credit card to purchase a $ 100 item, the merchant pocketed only $ 97 on that transaction.
The remaining $ 3 is shared by the bank, card network, and payment processing company (this is an over-simplification as there are other fees as well, but that’s the broad outline).
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While some merchants such as real estate and education would see lower fees, merchants who make cardless transactions (such as e-commerce merchants or hail shipping companies) would receive higher fees.
These changes have been postponed due to the outbreak of the Covid-19 pandemic, but as economies recover and reopen, the fee increases will now take place in April 2021.
While most of the discussion has centered on the implications for traders in the US, it is more than likely that the higher fees carried over to other developed markets like Singapore.
This is probably why Grab decided to encourage customers to use other recharge methods that are less costly to the company.
How can I avoid this fee?
The good news is that the processing fee only applies to Visa credit cards. If you top up your GrabPay wallet using one of the following payment methods, you will not be charged any fees:
- American Express credit cards
- Mastercard credit cards
- All debit cards (including Visa)
- Transfers from other GrabPay users
- Top up bank accounts via PayNow VPA or linked UOB accounts
In fact, there’s little reason you’d want to use a Visa credit card to top up your GrabPay wallet.
Visa reclassification of GrabPay top-ups as MCC 6051 (quasi-cash transactions) in July 2020 effectively undermined the prospect of rewards as practically every bank views this as an exclusion category.
For example, it would make no sense at all to use your DBS Altitude Visa to top up your GrabPay wallet and then pay with GrabPay as you could have earned your regular rewards if only you had paid directly with the DBS Altitude Visa.
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The good news is that in very select cases it is still possible to receive rewards for your GrabPay top-ups. I am thinking of the AMEX True Cashback Card, which provides 1.5 percent cashback on all transactions including topping up GrabPay wallets.
That might not sound like a lot, but keep in mind that earning GrabRewards points also gives you double immersion. This is a useful way to get rewards for transactions that they normally don’t.
For example, most banks exclude insurance premiums from receiving credit card rewards. However, if I use my AMEX True Cashback card to top up my GrabPay wallet and then use my GrabPay Mastercard to pay my insurance premiums (assuming the insurance company accepts Mastercard payments), I have achieved the same goal.
If you have other American Express cards such as the AMEX KrisFlyer credit card, the AMEX KrisFlyer Ascend, the AMEX Platinum credit card or the AMEX CapitaCard, you can also remember that an AMEX offer was launched in November 2020 with the Registered card members could earn miles and points with GrabPay until May 2021, subject to a limit.
AMEX KrisFlyer card members receive 1 mile per dollar with a cap of 5,000 miles, while AMEX Platinum credit card members receive 1 member reward point per dollar with a cap of 5,000 points. CapitaCard members earn 5 STAR $ per dollar, up to a maximum of 25,000 STAR $.
If you’ve managed to register your card (the maximum number of registrations has already been exhausted), you can still use it for GrabPay top-ups subject to the cap, with no fees.
GrabPay top-ups can also be a way for certain debit card holders to meet minimum spend requirements.
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For example, the Singlife Account offers a bonus of 0.5 percent pa on the first account balance of $ 10,000 if customers spend at least $ 500 per month on the Singlife Visa debit card (through June 30, 2021).
There are no exclusion categories for expenses. Remember that you can withdraw funds topped up with a debit card immediately to your PayNow linked bank account.
None of the above methods are affected by the introduction of the processing fee, so that’s good news, at the very least.
Conclusion
Grab’s decision to impose a $ 1 processing fee on Visa credit cards is annoying for consumers, but it’s pretty easy to bypass right now.
However, it does require some cleaning. If you currently have a Visa credit card that is linked to a GrabPay automatic top-up agreement, be sure to exchange the card before June 1, 2021.
$ 1 might not sound like a lot, but remember that the higher the frequency of your top-ups, the higher the processing fee – something to avoid!
This article was first published on SingSaver.com.sg.
