UPI vs cardsWhat it costs
UPI vs debit card vs credit card: what a merchant actually pays now
UPI vs card fees for merchants: UPI costs 0.4% above ₹2,000, capped at ₹300. Debit cards up to 0.9%, credit cards typically 1.5-2.5% - all from the official FAQ.
Updated: 6 min readहिन्दी
By upicharges.in editorial desk · Published:
The short answer
Is UPI or a card cheaper for a merchant?
UPI, at every amount. It costs nothing up to ₹2,000 and 0.4% above it, never more than ₹300 a payment (FAQ Q26, Q32).
The same FAQ puts debit card MDR at up to 0.90% and credit cards typically at 1.5% to 2.5% (Q4).
Now that UPI has a merchant charge of its own, a fair question is how it compares with the other ways customers pay: debit cards and credit cards. The official FAQ from NPCI and the Department of Financial Services answers this directly, which makes the comparison unusually easy to source. This article sets the three side by side, shows where the gap is small and where it is large, and is clear about the one figure nobody can confirm yet.
Every rule carries its FAQ question number so you can check it in the official document.
The UPI charge
For a regular (P2M) merchant, UPI MDR works like this FAQ question FAQ Q3, Q26, Q32:
- Payments of ₹2,000 or less: nothing.
- Payments above ₹2,000: 0.4% of the full amount.
- No single payment costs more than ₹300 - which is where 0.4% lands at ₹75,000.
Some sectors pay a flat ₹5 instead of 0.4% on payments above ₹2,000: railways, telecom, insurance and fuel FAQ question FAQ Q33, and electricity, water and piped-gas bills FAQ question FAQ Q41. And small merchants who take up to ₹1 lakh a month over QR straight into a personal account pay nothing at all FAQ question FAQ Q23, Q24.
What the FAQ says about cards
The FAQ compares UPI with cards in its own words. Standard credit card MDRs, it says, typically range from 1.5% to 2.5% of each transaction, while debit card MDRs are capped at up to 0.90% FAQ question FAQ Q4. It adds that UPI's charges are much lower than those of credit cards, debit cards and wallets FAQ question FAQ Q1, and that 0.4% is significantly lower than credit cards or payment gateways FAQ question FAQ Q31.
Two words in those figures matter:
- "Typically" for credit cards. 1.5% to 2.5% is the usual range, not a legal limit. Your own rate depends on your PSP, the card type and your agreement.
- "Capped up to" for debit cards. 0.90% is a ceiling. The rate your PSP actually charges can be lower, so in the comparison below the debit card figure is shown as "up to".
One bill, three ways to pay
Here is what a merchant pays on the same sale at three amounts. UPI figures come from our rules engine; card figures come from the FAQ's Q4 ranges.
Three things stand out.
At ₹1,500, UPI is free and cards are not. A small bill paid by UPI costs the merchant nothing FAQ question FAQ Q26. The same bill on a card costs something, because card MDR has no ₹2,000 threshold.
At ₹5,000, UPI costs ₹20. A debit card can cost up to a little over twice that, and a credit card typically about four to six times as much.
At ₹50,000, the gap is widest. UPI costs ₹200. A credit card at the typical range costs several times more, and as the amount rises past ₹75,000 UPI stops at ₹300 while card fees keep growing with the amount FAQ question FAQ Q32.
Small bills versus big bills
The pattern is simple once you see it:
| Payment | MDR | You receive |
|---|---|---|
| ₹1,000 | ₹0 | ₹1,000 |
| ₹2,000 | ₹0 | ₹2,000 |
| ₹5,000 | ₹20 | ₹4,980 |
| ₹20,000 | ₹80 | ₹19,920 |
| ₹75,000 | ₹300(cap) | ₹74,700 |
| ₹1,50,000 | ₹300(cap) | ₹1,49,700 |
- Up to ₹2,000, UPI costs nothing, which no card matches FAQ question FAQ Q26. For most kirana, tea-stall and pharmacy bills, this is the whole story.
- From ₹2,000 to ₹75,000, UPI costs 0.4%, below the debit card ceiling and well below the typical credit card range FAQ question FAQ Q4.
- Above ₹75,000, UPI costs a flat ₹300 FAQ question FAQ Q32, while card fees keep scaling with the bill. On a ₹1,50,000 bill, 1.5% alone would be ₹2,250.
For a flat ₹5 sector, the difference is sharper still. A ₹4,000 fuel payment costs ₹5 on UPI FAQ question FAQ Q33, Q40.
What about credit cards on UPI?
Some customers now pay through UPI using a credit card linked to it, such as a RuPay credit card, or a pre-approved bank credit line. The FAQ says these credit-linked payments follow the separate rules for credit products, and that the UPI MDR it describes applies to payments made directly from a user's bank account to a merchant's account FAQ question FAQ Q36.
So a customer "paying by UPI" from a credit card is, for MDR purposes, a credit payment - not the 0.4% UPI payment described above.
Card surcharges on customers?
The FAQ's rule against passing MDR on to customers is written about UPI payments: merchants cannot pass UPI MDR to buyers, and consumers pay only the posted price FAQ question FAQ Q34. The FAQ does not deal with surcharges on card payments, so neither do we. What you cannot do is add a UPI surcharge. The detail: Can a shopkeeper charge the 0.4% to customers? What the rules actually say.
Which should a merchant encourage?
On cost alone, UPI is the cheapest way to be paid at every amount FAQ question FAQ Q4. That does not mean you should refuse cards - many customers prefer them, especially for large purchases on credit. But if you are choosing which payment method to put first on the counter, the arithmetic points one way.
If your UPI money arrives over QR straight into a personal account and you collect up to ₹1 lakh a month, the comparison is even simpler: UPI costs you nothing at all FAQ question FAQ Q23, Q24. Check your category with Does the new UPI MDR apply to my shop? A step-by-step check.
Before you decide
- Work out how many of your payments are above ₹2,000 - only those cost anything on UPI FAQ question FAQ Q26.
- Look up the card rates on your own PSP's rate card; the FAQ's figures are typical ranges and ceilings, not your contract.
- Estimate your UPI month with the monthly cost estimator, and any single payment with the MDR calculator.
- From 15 October 2026 FAQ question FAQ Q5, check your settlement report for any UPI fee above the rules - see How to read your UPI settlement statement and spot a wrong deduction.
Worked months for a kirana, a restaurant and a pharmacy are in How much will UPI MDR cost my business? Worked scenarios for a kirana, a restaurant and a pharmacy, and the whole picture of the new rules is in UPI charges from 15 October 2026: the complete guide for merchants.
Common questions
Is UPI cheaper than a credit card for merchants?
Yes. UPI costs nothing up to ₹2,000 and 0.4% above it, capped at ₹300; the FAQ puts standard credit card MDR typically at 1.5% to 2.5% (FAQ Q4, Q26, Q32).
What is the debit card MDR?
The FAQ says debit card MDRs are capped at up to 0.90%. That is a ceiling; your PSP's actual rate can be lower (FAQ Q4).
Does the 0.4% UPI MDR apply to a credit card linked to UPI?
No. Credit-linked UPI payments follow the separate rules for credit products (FAQ Q36).
What is the MDR on RuPay debit cards from October 2026?
Not confirmed. The FAQ does not give a RuPay debit rate, and reports say a new rate is yet to be finalised. We will add it when it is published.
Everything in one place: the complete guide to UPI charges →
upicharges.in editorial desk — Checks every article against the NPCI/DFS FAQ of 15 September 2026
Every fact in this article comes from the NPCI/DFS FAQ of 15 September 2026. Read the official NPCI/DFS FAQ