How to dodge Grab's newly announced $1 fee on GrabPay top-ups

PHOTO: Lianhe Zaobao

From June 1,  2021, Grab will charge a $1 processing fee on all GrabPay wallet top-ups made with Visa credit cards. Does it really matter, and how can you avoid it?

Grab recently announced that effective June 1, 2021, a $1 processing fee will be levied on all GrabPay wallet top-ups made with visa credit cards.

This fee will be waived for all top-ups of at least $400 in a single transaction, and does not apply to other Grab transactions made with Visa credit cards, like Grab rides or GrabFood.

Although $1 is small in the grand scheme of things, it still marks a significant development as this is the first time the platform has introduced a top-up fee.

If anything, most other mobile wallets offer incentives for customers to top-up their balances, 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 continue enjoying fee-free top-ups for your GrabPay wallet. 

Grab is likely paying higher merchant fees to Visa

In February 2020, Visa announced that it would adjust its interchange fees for merchants in the USA. Interchange fees, for the uninitiated, are one of the fees that merchants pay to accept credit cards. 

For example, if a merchant pays a 3 per cent interchange fee and a customer buys a $100 item with his credit card, the merchant only pockets $97 of that transaction.

The remaining $3 is shared by the bank, card network and payment processing company (it’s an oversimplification as there are other fees involved too, but those are the broad strokes).

Read Also
GrabPay wallet update: You can now make transfers to your bank account. Here's everything to know
GrabPay wallet update: You can now make transfers to your bank account. Here's everything to know

While some merchants like real estate and education would see lower fees, merchants processing card-less transactions (such as e-commerce merchants or ride-hailing companies) would see fees increased. 

These changes were postponed due to the outbreak of the Covid-19 pandemic, but with economies recovering and reopening, the fee hikes will now take place in April 2021.

While most of the discussion has centered around the impact for merchants in the USA, it’s more than likely that the higher fees have diffused to other developed markets such as Singapore. 

This is presumably why Grab has decided to nudge customers towards other top-up methods which are less costly for the company. 

How can I avoid this fee?

The good news amidst all this is that the processing fee only applies to visa credit cards. If you make your GrabPay wallet top-ups with any of the payment methods below, you will not be charged any fees:

  • American Express credit cards
  • Mastercard credit cards
  • All debit cards (including Visa)
  • Transfers from other GrabPay users
  • Bank account top-ups via PayNow VPA or linked UOB accounts

In fact, there’s very little reason why you’d want to use a Visa credit card to top-up your GrabPay wallet anyway.

Visa’s reclassification of GrabPay top-ups as MCC 6051 (quasi cash transactions) in July 2020 effectively killed off the prospect of earning rewards, because virtually every bank considers this 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, since you could have earned your regular rewards by just paying with the DBS Altitude Visa directly. 

Read Also
10 best e-wallets & mobile payment apps 2021: PayLah, GrabPay, Google Pay & more
10 best e-wallets & mobile payment apps 2021: PayLah, GrabPay, Google Pay & more

The good news is that it’s still possible, in very select cases, to earn rewards on your GrabPay top-ups. I’m thinking of the AMEX True Cashback Card, which earns 1.5 per cent cashback on all transactions including GrabPay wallet top-ups. 

This may not sound like a lot, but remember that you can double dip by earning GrabRewards points too, and it’s a useful way to earn rewards on transactions that don’t normally receive them. 

For example, most banks exclude insurance premiums from earning credit card rewards. But if I use my AMEX True Cashback Card to top up my GrabPay wallet, then use my GrabPay Mastercard to pay my insurance premiums (assuming the insurance company accepts Mastercard payments), I’ll have achieved the same end. 

Alternatively, if you have other American Express cards like the AMEX KrisFlyer Credit Card, AMEX KrisFlyer Ascend, AMEX Platinum Credit Card or AMEX CapitaCard, you may recall that an AMEX Offer launched in November 2020 which allowed registered cardmembers to earn miles and points on GrabPay top-ups till May 2021, subject to a cap. 

AMEX KrisFlyer cardmembers will earn 1 mile per dollar, capped at 5,000 miles, while AMEX Platinum Credit Card members will earn 1 membership rewards point per dollar, capped at 5,000 points. CapitaCard members earn 5 STAR$ per dollar, capped at 25,000 STAR$.

If you managed to register your card (the maximum number of registrations has already been exhausted), you can continue to use it for GrabPay top-ups subject to the cap, and without fees. 

GrabPay top-ups may also be a way for holders of certain debit cards to hit minimum spend requirements.

Read Also
Should you use 'Buy now pay later' services? Atome vs Grab PayLater vs Hoolah vs OctiFi vs Rely vs Split
Should you use 'Buy now pay later' services? Atome vs Grab PayLater vs Hoolah vs OctiFi vs Rely vs Split

For instance, the Singlife Account offers a bonus 0.5 per cent p.a interest on the first $10,000 balance when customers spend at least $500 per month on the Singlife Visa debit card (until June 30, 2021). 

There are no spending exclusion categories, and remember, you can immediately cash out any funds topped up with a debit card to your PayNow-linked bank account. 

None of the above methods will be impacted by the introduction of the processing fee, so that’s good news at least. 

Conclusion

Grab’s decision to impose a $1 processing fee on Visa credit cards is annoying for consumers, but at the moment, it’s fairly easy to circumvent. 

However, it does necessitate some housekeeping. If you currently have a visa credit card linked to a GrabPay automatic recharge arrangement, you’ll definitely want to swap out the card before June 1, 2021.

$1 may not sound like a lot, but remember that the higher the frequency of your top-ups, the heftier the processing fee – something to be avoided!

This article was first published in SingSaver.com.sg.