UPI MDR vs Card Charges: What Merchants Will Pay

UPI payments will carry a new cost for some merchants from 15 October 2026.

Eligible person-to-merchant transactions above ₹2,000 will attract a 0.4% merchant discount rate.

The charge will be paid by merchants, while customers making these payments will not bear the MDR directly.

Despite this change, UPI remains cheaper than many card-based payment options.

The new MDR applies to merchants accepting eligible high-value UPI payments. However, the fee is considerably lower than typical card-based charges.

According to NPCI, credit card MDRs generally range from 1.5% to 2.5%. Debit card MDRs can go up to 0.90%.

Actual card charges may vary based on the card network, merchant category and agreements between banks and merchants.

The difference becomes clearer with a ₹10,000 transaction. At 0.4%, a UPI payment would cost the merchant ₹40. A debit card transaction at 0.90% would cost ₹90.

Meanwhile, a credit card transaction could cost between ₹150 and ₹250 at MDRs of 1.5% and 2.5%, respectively.

UPI also has a ₹300 MDR cap for eligible transactions. The 0.4% charge reaches this maximum at ₹75,000. Therefore, payments above ₹75,000 would continue to attract a maximum MDR of ₹300.

The advantage becomes more significant for larger payments. On a ₹75,000 transaction, a merchant would pay ₹675 at a 0.90% debit card MDR. A 1.5% credit card MDR would cost ₹1,125, while a 2.5% rate would mean ₹1,875.

Even after the new MDR takes effect, UPI is expected to remain a more economical payment option for merchants than debit and credit cards.

While eligible transactions above ₹2,000 will carry a 0.4% charge, the ₹300 cap limits the overall cost on larger payments.

By comparison, card transactions can attract significantly higher MDRs.

Therefore, although merchants will face an added expense on certain UPI payments, the lower rate keeps UPI relatively cost-effective.

Image by Mohamed Hassan from Pxhere (Free for commercial use / CC0 Public Domain)

Image published on December 06, 2023

Image Reference: https://pxhere.com/en/photo/1681900