When you collect Rs 10,000 via a gateway, you receive less. The MDR (Merchant Discount Rate) is deducted before settlement. Understanding these charges helps optimize your payment method mix.
MDR by Method
UPI: Rs 0-5 per transaction. Debit cards: 0.4-0.9%. Credit cards: 1.5-2.0%. Net banking: Rs 7-15. For Rs 50 lakh monthly, the mix dramatically affects total costs.
Real Cost Calculation
Rs 50 lakh with 60% UPI, 20% debit, 10% credit, 10% cash: total gateway cost Rs 18,000/month or 0.36% of collections. Manageable.
GST on Gateway Charges
18% GST on processing fees. Rs 18,000 MDR means Rs 3,240 GST. Claim input credit if GST-registered.
Passing Charges to Parents
RBI prohibits passing MDR for debit/UPI. For credit cards, you can add convenience fee — but it discourages adoption. Recommended: absorb all.
Negotiating Rates
Once past Rs 10 lakh monthly, negotiate. Credit card drops from 2% to 1.5%, debit from 0.9% to 0.5%. Get competing quotes.
Settlement Timing
T+2 is free. T+1 costs 0.1-0.2% extra. Instant costs 0.5-1%. Use standard T+2 for routine needs.
International Payments
NRI parents: 2.5-3.5% MDR plus conversion. Wire transfer is cheaper for amounts above Rs 50,000.
Annual Review
Download 12 months of reports, calculate totals by method, compare with agreement. Switch gateways if competitor offers significantly better pricing.
Budgeting
Budget gateway charges at 0.3-0.5% of total digital collections. Include as line item so it does not surprise the finance committee.