Charges will apply to payments made via RuPay cards, not just UPI; find out the difference between the two.

UPI MDR Charges: What is the difference between standard UPI payments and RuPay Credit Card-on-UPI payments? Learn about MDR charges, UPI rules, the payment method using credit cards, and the impact on customers or merchants.

UPI vs. RuPay Card: Amid the rising use of digital payments, there is significant discussion regarding UPI charges. It has also been revealed that MDR (Merchant Discount Rate) applies to payments made by linking a RuPay Credit Card to UPI. Here is a look at the differences between standard UPI and RuPay Credit Card payments, and how these charges affect customers or merchants.

What is UPI?

UPI is a digital payment system that allows users to transfer money directly from their bank accounts to individuals or merchants. Payments are made using mobile numbers, UPI IDs, or QR codes. Currently, customers are not charged any regular MDR fees for UPI payments made via standard bank accounts.

Why is there talk about UPI charges?

There is active discussion regarding MDR on UPI. MDR is a fee charged to merchants who accept digital payments. However, this will not directly impact customers, and there will be no additional charge on every UPI payment.

What is a payment made by linking a RuPay Credit Card to UPI?

Customers can link their RuPay Credit Card to a UPI app and make payments by scanning a merchant's QR code. In this process, funds are not deducted from the bank account; instead, the payment is made against the credit card's assigned limit. Here, UPI serves merely as the payment interface, while the transaction itself is processed via the credit card.

Why does MDR apply to UPI payments made via RuPay Credit Cards?

In standard UPI transactions, money is deducted from the bank account, whereas transactions via RuPay Credit Cards involve the credit card network. MDR may apply to the merchant in this case—varying by category—and 18% GST may also be levied on it.

The biggest difference between the two lies in the source of the funds used for the payment.

In standard UPI:

Funds are deducted directly from the bank account.
It is a bank-to-bank transaction.
No MDR is charged to the customer for standard UPI payments.
Payments can be easily made using QR codes.

In RuPay Credit Card-on-UPI:

Funds are drawn from the credit limit of the linked RuPay credit card.
The customer is required to pay the credit card bill later.
MDR may apply to the merchant.
This facility is primarily intended for merchant payments.

Will MDR apply to every UPI payment?

MDR charges do not apply to every UPI payment; simply using UPI does not incur extra charges for the customer. Standard bank account UPI transactions and RuPay Credit Card-on-UPI transactions are processed differently. For RuPay Credit Card UPI payments, the MDR rate may be determined based on the merchant category and the type of transaction.