The paper explores the dual impact of Digital Financial Inclusion (DFI) on poverty reduction and over-indebtedness in rural and urban Indonesia. It highlights how DFI can enhance access to financial services, particularly for marginalized communities, aiding in poverty alleviation. However, it also identifies significant risks, especially in regions with low financial literacy and weak regulatory oversight. In rural areas like Sukamaju Village, these factors heighten the risk of debt accumulation and financial instability. In urban settings such as Jakarta, aggressive digital financial marketing and high living costs often push residents into risky financial behaviors, increasing the risk of over-indebtedness. The paper concludes that a balanced approach to DFI is essential, emphasizing strong regulatory frameworks, improved financial literacy, and tailored financial products. A comprehensive strategy involving institutional support, responsible lending, and enhanced digital infrastructure is necessary to maximize DFI’s benefits while mitigating its risks.