Failure Patterns, Disputes, Security and Official Sources
Can a merchant add a card surcharge or convenience fee in India? Rules and risks
What RBI, NPCI, card network rules, consumer law and MRP rules mean for Indian merchants who want to pass card or UPI fees to customers, and safer alternatives.
Passing payment fees to customers is riskier than many merchants think. RBI instructions on debit card MDR say banks must ensure merchants do not pass debit-card MDR to customers. NPCI's FAQ on the 2026 UPI MDR says merchants cannot pass the UPI MDR to customers. Card network rules and most merchant agreements restrict surcharges on credit cards too. Any charge beyond the price must, under the RBI's 2025 Master Direction on Payment Aggregators, be shown clearly to the payer before the transaction, and consumer law treats fees revealed only at checkout ("drip pricing") as a dark pattern. For packaged goods, charging above the MRP is not allowed. The safer route is to build payment costs into your prices, or to offer an honest cash or UPI discount where your agreement and the law permit. This guide is general information, not legal advice. It belongs to the failure patterns overview.
What each rule says
| Source | What it says about passing fees on | Applies to |
|---|---|---|
| RBI, Rationalisation of MDR for debit card transactions (Dec 2017) | Banks shall ensure merchants on-boarded by them do not pass MDR charges to customers while accepting debit card payments | Debit cards |
| PSS Act s.10A and S.O. 5067(E) (14 Sept 2026) | No bank or system provider may charge, directly or indirectly, any person making or receiving payment by RuPay debit or UPI up to ₹2,000 | Banks and system providers (and so the payment itself) |
| DFS/NPCI FAQ on UPI MDR (15 Sept 2026), Q34 | Merchants on-boarded cannot pass MDR charges to customers when accepting UPI | UPI MDR |
| RBI Master Direction on Payment Aggregators (15 Sept 2025), para 10(c) | PAs to follow MDR instructions; charges beyond the price of goods or services must be distinctly displayed to the payer before the transaction | Online and physical PAs |
| Card network rules (Visa, Mastercard, RuPay, others) | Rules on surcharging differ by network and country; Indian acquirer agreements commonly prohibit or restrict them | Credit and debit cards |
| CCPA Guidelines for Prevention and Regulation of Dark Patterns, 2023 | Drip pricing (revealing extra charges late in checkout) listed as a dark pattern | Consumer-facing platforms and sellers |
| Legal Metrology (Packaged Commodities) Rules | Retail sale price above MRP is not allowed for pre-packaged goods | Packaged goods |
Why the risks are real
- Agreement breach. An acquirer can terminate or hold settlement if you surcharge against your agreement.
- Customer complaints and chargebacks. Customers who see an unexpected extra may dispute it.
- Consumer law. A fee not shown upfront can be a dark pattern or unfair trade practice under the Consumer Protection Act, 2019.
- MRP. For packaged goods, price plus a "card fee" above MRP can breach Legal Metrology rules.
- GST. A surcharge is part of the consideration for your supply, so GST applies to it at the rate of the goods or services.
Convenience fees online
Some online platforms, particularly for tickets or government services, show a convenience fee for using a platform. Where a fee is lawful, it is typically a disclosed platform or service fee, applied equally regardless of payment method and shown before payment. That is different from adding a card-only surcharge. NPCI's FAQ also says UPI apps may not charge a platform fee for UPI payments. If you plan any fee, have a lawyer check it against your agreement, the Consumer Protection Act, 2019 and the dark patterns guidelines.
Worked example: price the fee in, not on (illustrative)
A boutique's average sale is ₹2,500. About 30% of sales are on credit cards at an illustrative 1.8%; the rest is UPI under and above ₹2,000 and debit cards.
| Approach | What the customer sees | Merchant result |
|---|---|---|
| Card surcharge of 2% | ₹2,550 for card payers | Risk of breach, complaints, chargebacks |
| Price increase of 0.6% for everyone | ₹2,515 on every sale | Covers average payment cost; no checkout surprise |
| Cash/UPI discount | ₹2,500 card price; small discount for UPI | Lawful where the agreement allows; check that "discount" is not a disguised surcharge |
The average payment cost across all sales here is about 30% × 1.8% + small debit and UPI costs ≈ 0.6%. You can work out your own with the MDR fee calculator and the monthly cost estimator.
Steering without surcharging
You may generally encourage cheaper methods without penalising others:
- Place the UPI QR prominently and say "UPI accepted".
- Offer RuPay debit acceptance clearly; it is free to accept by law.
- For high tickets, explain that bank transfer is available for B2B invoices.
- Do not refuse a card you have agreed to accept, or set a minimum card amount if your agreement forbids it.
Special cases
| Case | Point to check |
|---|---|
| Fuel stations | Card fuel surcharges have historically been charged by card issuers to cardholders; UPI MDR above ₹2,000 for fuel is a flat ₹5 paid by the merchant |
| Government fee payments | Specific departmental rules may allow transaction charges; check the notification |
| B2B invoices | A payment-method fee may be agreed in the contract; disclose it in advance and charge GST correctly |
| Education fees | NPCI treats education as a concessional category for UPI MDR |
FAQ
Can I charge extra for UPI payments above ₹2,000 once UPI MDR starts?
NPCI's FAQ says merchants cannot pass UPI MDR to customers. Build it into your pricing instead.
Can I set a minimum amount for card payments?
Check your agreement. Many acquirer agreements and network rules restrict minimums. Display any conditions clearly.
Can I offer a discount for cash?
Generally, a genuine discount disclosed upfront is lower risk than a surcharge, but check your agreement; some treat a "card price" as a surcharge in disguise.
If my customer agrees, is a surcharge fine?
Agreement by the customer does not override your merchant agreement, RBI and NPCI instructions or consumer law.
Sources
- Reserve Bank of India — debit card MDR instructions and Master Direction on Payment Aggregators
- Department of Financial Services — UPI MDR FAQ (Q34 on pass-through)
- Department of Consumer Affairs (CCPA) — dark patterns guidelines
- Department of Consumer Affairs, Legal Metrology — MRP rules for packaged commodities
- National Consumer Helpline — consumer complaints
