Tell them to stick it or you wont renew. Either way you would be better off. And yes it is a normal charge, but if you kick up a fuss they tend to waiver it.
Yes, this makes no sense either. If they have card machines, then why not?. I have had this happen to in a few different places, I can only think it has something to do with the charge they incur when you use the machine. Not really your problem, but this way they make it yours.
I think it might have to do with a previous contract you had?
IIRC I also had to pay some money in at MTN a while back for an upgrade.
The way that they explained it, was that there was some special on my previous phone and because I upgrade before the 24 months ran out, I had to pay in the difference.