Cost Examples and Choosing an Acceptance Set-up
How to compare merchant payment offers: effective rate, rate cards and the questions to ask
A method for Indian merchants to compare offers from banks, payment aggregators and gateways on an effective-rate basis, with an illustrative three-offer comparison and red flags.
The only fair way to compare payment offers is on your own sales: apply each offer's written rates to your actual payment mix, add every fixed charge, and divide the total by your digital sales to get an effective rate. A headline such as "1.5% on all cards" or "zero rental" tells you little until you know how many of your payments are UPI under ₹2,000, RuPay debit, other debit, credit and international cards, how many transactions you make and whether you will meet the waiver target. This guide shows the method with three illustrative offers (labelled P, Q and R, not real providers) and lists the red flags. It belongs to the best-fit method, and the offer comparison checklist lists every question.
Step 1: Build your sales profile
From three months of statements, average a month:
| Line | Monthly value | Transactions |
|---|---|---|
| UPI up to ₹2,000 | ₹2,50,000 | 600 |
| UPI above ₹2,000 | ₹50,000 | 15 |
| RuPay debit | ₹40,000 | 30 |
| Other debit | ₹1,00,000 | 60 |
| Credit (standard) | ₹1,20,000 | 50 |
| Credit (premium/corporate) | ₹40,000 | 10 |
| Total | ₹6,00,000 | 765 |
Step 2: Get every offer in the same format
Ask each provider for a dated rate card that lists, at least: rate per card type and channel; UPI treatment; fixed fees; device rental and waiver target; settlement time and instant settlement fee; refund and chargeback fees; minimum monthly fees; lock-in and exit charges. If a provider will not put a rate in writing, treat it as unknown.
Step 3: Apply the rates (illustrative offers)
| Line | Offer P: blended | Offer Q: per type | Offer R: low MDR, higher fixed |
|---|---|---|---|
| UPI up to ₹2,000 | 0% | 0% | 0% |
| UPI above ₹2,000 (after UPI MDR) | 0.4% | 0.4% | 0.4% |
| RuPay debit | 0% | 0% | 0% |
| Other debit | 1.5% blended | 0.85% | 0.8% |
| Credit standard | 1.5% blended | 1.75% | 1.6% |
| Credit premium | 1.5% blended | 2.3% | 2.2% |
| Fixed fee per card transaction | — | — | ₹4 |
| Terminal rental | ₹0 (waived) | ₹400 | ₹0 |
| Minimum monthly fee | ₹500 if fees below ₹500 | — | — |
Monthly cost:
| P | Q | R | |
|---|---|---|---|
| UPI above ₹2,000 | ₹200 | ₹200 | ₹200 |
| Other debit | ₹1,500 | ₹850 | ₹800 |
| Credit standard | ₹1,800 | ₹2,100 | ₹1,920 |
| Credit premium | ₹600 | ₹920 | ₹880 |
| Fixed fees (120 card transactions) | ₹0 | ₹0 | ₹480 |
| Rental | ₹0 | ₹400 | ₹0 |
| Total before GST | ₹4,100 | ₹4,470 | ₹4,280 |
| Effective rate | 0.68% | 0.75% | 0.71% |
For this mix, the blended offer P is cheapest, because debit cards (where the blend is above the cap-level rates of Q and R) are a smaller share than credit cards (where the blend is below). For a shop with more debit and less credit, the order could reverse. The point is to calculate, not to assume.
Check the blend against the cap. Offer P charges 1.5% on Visa or Mastercard debit cards. For a merchant with turnover above ₹20 lakh, the RBI cap is 0.9% on terminals. A blended rate that applies 1.5% to debit cards would exceed the cap; ask the provider to confirm debit cards are charged within it. See debit card caps. If P had to charge debit at 0.9%, its total would fall to ₹3,500.
Step 4: Add what the rate card hides
- Settlement: an offer settling T+2 instead of T+1 costs you a day of working capital; instant settlement costs a fee. See settlement and cash flow.
- Refunds and chargebacks: a ₹300 chargeback fee matters to an online store, not to a kirana.
- Waiver risk: if a rental is waived only above ₹2 lakh of card sales and you are at ₹2.1 lakh, one weak month costs the rental.
- Price changes: promotional rates for six months then standard rates.
- Lock-in: a 24-month lock-in reduces your ability to move when the UPI MDR or your mix changes.
Red flags
| Red flag | Why |
|---|---|
| Fee on UPI up to ₹2,000 or RuPay debit | Not allowed under section 10A and S.O. 5067(E) |
| Debit card MDR above the RBI cap | Breach of RBI instructions |
| Rate only given verbally | Cannot be enforced or compared |
| "No MDR" but high rental or fixed fees | Cost moved, not removed |
| Settlement "subject to review" with no timeline | Cash-flow risk |
| Provider not a bank and not on the RBI's list of authorised PAs | Regulatory risk |
| Pressure to sign the same day | No time to compare |
Step 5: Decide and record
Write down the effective rate for each offer, the other factors (settlement, support, exit), and why you chose. Recheck after three months against actual statements. The MDR fee calculator is handy for checking each line, and the monthly cost estimator for a quick range.
FAQ
Should I always choose the lowest effective rate?
Not always. Reliability, settlement speed, dispute support and exit terms matter. A small difference in rate can be worth paying for better service.
How many offers should I get?
Three is a practical number for a small business: for example, your own bank, another bank and a payment aggregator.
Can I negotiate after signing?
You can ask, especially when volumes grow. Keep your effective-rate calculation ready.
What if the provider will not split rates by card type?
Ask for a sample statement and compute the effective rate on it. If you cannot see how cards are charged, consider another offer.
Sources
- Reserve Bank of India — debit card MDR caps and authorised payment aggregators
- Department of Financial Services — section 10A notification and UPI MDR FAQ
- NPCI — UPI MDR implementation
