Unified Payments Interface (UPI) has transformed the way Indians make digital transactions, allowing instant, secure, and cost-free money transfers. However, recent news has sparked concerns about potential UPI transaction fees that might affect users. So, is it true that free UPI payments are ending? How much will you have to pay? Let’s break it down.
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Understanding UPI and Its Charges
What is UPI and How Does it Work?
UPI is a real-time payment system developed by the National Payments Corporation of India (NPCI) that allows seamless money transfers between banks using mobile apps like Google Pay, PhonePe, Paytm, and BHIM. Users can send money, pay bills, or make purchases without requiring bank account details, only using a UPI ID or mobile number.
Are UPI Payments Really Going to Be Charged?
The short answer is No, standard UPI transactions remain free. However, starting April 1, 2023, a 1.1% interchange fee applies to merchant transactions using Prepaid Payment Instruments (PPIs) like digital wallets (Paytm Wallet, PhonePe Wallet, etc.) for transactions above ₹2,000.
Who Will Pay the UPI Fees?
- Customers using regular UPI (bank-to-bank transactions) are NOT charged.
- Merchants accepting payments via PPIs above ₹2,000 will bear the interchange fee.
- Wallet-to-wallet transfers or loading money into wallets may involve minimal fees.
Breaking Down UPI Charges
1. Standard UPI Transfers (Bank-to-Bank) — 100% Free
If you are using Google Pay, PhonePe, or Paytm to send money directly from your bank account, you don’t have to worry. These transactions are free.
2. UPI Payments via Digital Wallets (PPIs) — Fees Apply for Merchants
When you load money into a digital wallet and then use it for payments, merchants accepting such payments will pay an interchange fee of up to 1.1% if the amount exceeds ₹2,000.
3. UPI Limits & Restrictions
- Daily Transaction Limit: ₹1 lakh per day for most users.
- Higher Limits: ₹5 lakh for payments like education, healthcare, and investments.
- Number of Transactions: Banks may impose a limit of 10-20 UPI transactions per day.
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How to Avoid UPI Charges?
To ensure zero charges on your UPI payments, follow these tips:
- Use Bank-to-Bank Transfers: Always send money directly from your bank account instead of using wallets.
- Avoid Loading Money into Wallets: Instead of adding funds to digital wallets, pay directly via UPI.
- Merchants Can Opt for QR Code Payments: If you are a merchant, accept UPI QR code payments linked to a bank account.
Additional Insights
Impact on Merchants and Businesses
- Small businesses might reconsider accepting wallet-based UPI transactions due to the additional fees.
- Larger merchants might continue using wallets for convenience but will factor the interchange fee into product pricing.
- Digital payment platforms may introduce new incentives or discounts to encourage wallet-based transactions despite the fees.
Government’s Stand on UPI Charges
- The Indian government and RBI have reiterated their commitment to keeping standard UPI transactions free for consumers.
- Digital wallets are primarily impacted as a way to balance the cost of maintaining payment infrastructure.
How This Affects Banks and Payment Apps
- Banks may introduce new incentives for UPI transactions.
- Apps like Google Pay and PhonePe might offer cashback rewards to keep users engaged in wallet transactions despite charges.
(FAQs)
1. Are UPI transactions free for customers?
Yes, standard UPI transactions between bank accounts remain free. Only PPI-based merchant transactions above ₹2,000 incur a fee.
2. Will I be charged for sending money via Google Pay or PhonePe?
No, if you are transferring money from your bank account to another bank account via UPI, there is no charge.
3. How much is the UPI transaction fee for merchants?
Merchants accepting wallet-based payments over ₹2,000 will pay an interchange fee of up to 1.1%.
4. Can I still use Paytm, PhonePe, or Google Pay for free?
Yes, but to avoid charges, use them for direct bank-to-bank UPI transactions instead of wallets.
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