Everydaything

Digital Payments & UPI

Ever since the new October 15, 2026 UPI MDR started making headlines, a specific piece of confusion keeps showing up in the comments and search queries: “Wait, don’t I already pay something when a customer taps a RuPay credit card on UPI?” The answer is yes, and it has nothing to do with the new 0.4% charge. Merchants have been paying an interchange fee on RuPay-credit-card-funded UPI transactions for a few years already, ever since NPCI first allowed the linkage, and it runs on completely separate rules from the bank-account UPI MDR everyone is suddenly talking about. Here’s what that older fee actually is, how long it’s existed, and exactly how it differs from the new one.

Quick answer

RuPay credit cards have been linkable to UPI since the RBI first approved it in its June 2022 policy statement, with banks rolling the feature out through late 2022 and 2023 (SBI Card, India’s largest standalone card issuer, went live on August 10, 2023). Whenever a customer pays a merchant more than ₹2,000 using a RuPay credit card through UPI rather than a linked bank account, the merchant pays an interchange fee typically reported in the 1-2% range, similar in spirit to a normal credit card swipe. This is a completely different charge from the new 0.4% UPI MDR that starts October 15, 2026, which applies only to ordinary bank-account-to-bank-account UPI payments. The RuPay-credit-card fee is paid entirely by the merchant, never the customer; person-to-person transfers aren’t possible with a credit card on UPI at all; and it has already been in force for roughly three years by the time the new bank-account MDR arrives.

When did RuPay credit cards get linked to UPI?

The RBI announced the policy shift in its June 8, 2022 monetary policy statement, allowing credit cards to be linked to UPI for the first time, starting with RuPay cards specifically. NPCI then had to build out the technical rails and get individual issuing banks certified, so the rollout happened bank by bank rather than all at once: Union Bank of India and a handful of public-sector banks were among the earliest to go live later in 2022, and SBI Card, India’s largest dedicated credit card issuer, followed on August 10, 2023. ICICI Bank and IndusInd Bank enabled it for their RuPay credit cardholders later the same year. By the time the new October 2026 UPI MDR was even announced, this RuPay-credit-card-on-UPI fee had already been quietly running in the background for more than three years.

Why does a credit card carry a fee that a bank account doesn’t?

A normal UPI payment moves money you already have sitting in your bank account, which is exactly why it qualified for the zero-MDR mandate that applied to UPI from January 2020 onward. A RuPay credit card on UPI works differently: the bank is fronting you borrowed money against your credit limit, the same way it does on a physical card swipe, and you repay it on your billing cycle. Because it’s a lending product rather than a transfer of your own funds, it was never covered by the zero-MDR rule in the first place, credit cards have always carried an interchange fee, on UPI or off it. That’s the core reason this charge exists, and why it long predates the new bank-account UPI MDR.

• Below ₹2,000: No fee at all, regardless of whether the payment came from a bank account or a linked RuPay credit card.
• Above ₹2,000: RuPay-credit-card-on-UPI attracts an interchange fee typically cited between 1% and 2% (roughly 1.1% is a commonly quoted blended figure, with some merchant category codes running closer to 2%), split between the card-issuing bank and the network/acquirer.
• No upper cap: Unlike the new 0.4% UPI MDR, which is capped at ₹300 per transaction, reported RuPay-credit-card interchange rates apply as a straight percentage with no equivalent cap mentioned in NPCI’s public guidance.

Regular UPI vs. RuPay credit card on UPI, side by side

Feature	Regular UPI (bank transfer)	RuPay Credit Card via UPI
What’s actually moving	Money already in your bank account	Borrowed money against your credit limit
Available since	UPI launched 2016; free for merchants since Jan 2020	Linking allowed from June 2022; banks went live through 2022-2023
Fee on payments up to ₹2,000	Free	Free
Fee on payments above ₹2,000	0.4% MDR, capped at ₹300 (from Oct 15, 2026)	~1-2% interchange fee, no cap
Who pays it	Merchant	Merchant
Person-to-person transfers	Always free, any amount	Not permitted at all
Extra cost to the customer	None	None (beyond normal credit card billing/interest if unpaid)

Who actually pays this fee?

The merchant pays it, exactly like the new UPI MDR, and exactly like a normal card-swipe MDR. The interchange fee is deducted by the payment aggregator or acquiring bank before the money is settled into the merchant’s account, the same mechanism that has always applied to physical card payments. Some merchants factor this into how they price goods over time, but there’s no mechanism for adding it as a visible surcharge at checkout, so the customer’s bill doesn’t change based on which funding source they choose.

Can you send money to a friend with a RuPay credit card on UPI?

No. RuPay-credit-card-on-UPI was built specifically for person-to-merchant (P2M) payments, not person-to-person (P2P) transfers. NPCI’s framework doesn’t allow a linked credit card to be selected as the funding source when you try to send money to another individual through a UPI app, only bank accounts and debit-linked accounts can fund a P2P transfer. If you try to split a bill or pay a friend back, your UPI app simply won’t offer the RuPay credit card as an option for that transaction, you’ll need to switch to your bank account.

How a merchant can tell which fee applied to a payment

On the surface, a UPI QR payment looks identical whether the customer funded it from their bank account or a linked RuPay credit card, the collection experience doesn’t visibly change. The difference shows up afterward, in the settlement report or payment gateway dashboard. A payment funded by a bank account shows only the platform fee and GST (and, from October 15, 2026, the 0.4% MDR on amounts above ₹2,000) deducted from the gross amount. A payment funded by a RuPay credit card shows an additional interchange/MDR line, typically in the 1-2% range, deducted before the platform fee. Most payment aggregators (Razorpay, PayU, Cashfree, and similar) label the funding instrument type in their per-transaction reports, so a merchant reconciling settlements can filter by instrument type to see exactly how many payments came in via card-linked UPI versus a plain bank transfer, and price or plan around it accordingly.

Frequently asked questions

Does RuPay credit card on UPI have charges?

Yes. Merchants pay an interchange fee, typically reported in the 1-2% range, on RuPay-credit-card-funded UPI payments above ₹2,000. Payments of ₹2,000 or less carry no fee at all.

Is RuPay credit card UPI charge the same as the new UPI MDR?

No. The RuPay credit card fee has existed since NPCI first allowed the linkage in 2022, applies only when a credit card funds the payment, and runs at roughly 1-2% with no cap. The new UPI MDR, effective October 15, 2026, applies only to ordinary bank-account-funded UPI payments above ₹2,000, at 0.4% capped at ₹300. They are separate charges under separate rules.

Who pays the RuPay credit card UPI fee?

The merchant, not the customer. It’s deducted from the settlement amount by the payment aggregator or acquiring bank, the same way a physical card-swipe MDR is deducted, and there’s no mechanism for merchants to pass it on as a visible surcharge.

Can I send money to a friend using RuPay credit card UPI?

No. RuPay-credit-card-on-UPI only supports person-to-merchant payments. Person-to-person transfers aren’t possible with a linked credit card as the funding source, you’d need to use a bank account or debit card instead.

How much is the RuPay credit card UPI charge?

Reports commonly cite a range of roughly 1% to 2% on transactions above ₹2,000, with about 1.1% mentioned as a typical blended figure and rates varying somewhat by merchant category. There is no upper cap on the fee, unlike the new 0.4% UPI MDR, which is capped at ₹300 per transaction.

This article is for general information only, not financial or legal advice. Interchange rates on RuPay-credit-card-on-UPI transactions are set and periodically revised by NPCI and can vary by merchant category and issuing bank; always check your payment aggregator’s current settlement terms for the exact rate applied to your account.

References

• Business Standard – RBI allows credit cards to be linked with UPI platform, to start with RuPay
• NPCI – SBI Card Enables RuPay Credit Cards on UPI (press release)
• ICICI Bank – ICICI Bank introduces UPI payments via RuPay Credit Cards
• Business Standard – UPI gets MDR: how the 0.4% merchant fee compares with debit and credit cards
• Razorpay – Understanding UPI MDR for merchants in a payment gateway