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UPI vs Debit/Credit Card: Which is Cheaper for Merchants?
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News18•25-09-2026, 16:00
UPI vs Debit/Credit Card: Which is Cheaper for Merchants?
- •UPI will incur a 0.4% Merchant Discount Rate (MDR) on Person-to-Merchant (P2M) transactions over Rs 2,000 starting October 15, with small merchants exempt.
- •NPCI states that the new UPI MDR of 0.4% (capped at Rs 300) is still cheaper than indicative debit card rates (up to 0.90%) and credit card rates (around 2%).
- •For a Rs 10,000 P2M transaction, UPI's Rs 40 charge is significantly lower than a credit card's Rs 200 or a debit card's Rs 90.
- •Most everyday UPI payments, including P2M transactions up to Rs 2,000 (96% of total UPI transactions), will continue to have zero MDR.
- •Transactions above Rs 2,000 in essential sectors like railways, telecom, insurance, fuel, and agriculture will have a flat MDR of Rs 5.
Key Questions Answered
Starting October 15, specific Person-to-Merchant (P2M) UPI transactions over Rs 2,000 will incur a Merchant Discount Rate (MDR) of 0.4% which is capped at Rs 300, while merchants will bear this cost and small merchants remain explicitly exempt.
P2M transactions up to Rs 2,000, Person-to-Person (P2P) transfers, and transactions handled by small merchants with monthly receipts up to Rs 1 lakh will continue with zero MDR charges.
The NPCI notes that the new 0.4% UPI MDR charge remains significantly lower than standard indicative rates, which are up to 0.90% for debit cards and around 2% on average for credit cards.
