Understanding Credit Card Integration with UPI: A Comprehensive Overview

In recent years, India has celebrated the inception of UPI as a remarkable domestic innovation in the digital payment landscape. Just as Facebook, Instagram, and ChatGPT achieved rapid popularity, UPI has also reached impressive heights when considering its vast market and widespread adoption. 
 
To put this growth into perspective, let's examine some statistics from the NPCI website. In July 2016, UPI recorded a mere 90,000 transactions. Fast forward to December 2022, and the numbers skyrocketed to approximately 7.8 billion transactions – a truly astounding evolution. 
 
Until recently, UPI payments were exclusively linked to debit cards, which are essentially tied to bank accounts. However, there has been a significant development recently, and it has implications for consumers like you. 
 
The Transformation 
 
One of the primary reasons behind UPI's success in India is its user-friendly nature and robust security for cashless transactions. Traditionally, UPI payments were strictly associated with debit cards. However, this approach posed challenges for those who preferred the flexibility of credit cards and created some friction in the credit card industry. 
 
In recognition of these dynamics, the Reserve Bank of India (RBI) made a pivotal decision in June 2022 to permit the linkage of credit cards for UPI payments. It's worth noting that this facility is presently exclusive to RuPay credit card users. Therefore, if you hold a Visa or MasterCard credit card, you won't be able to utilize this feature.

 
It's essential to clarify that the concept of using credit for UPI payments isn't entirely new, as some companies already offered credit options for UPI transactions, albeit not via credit cards. Credit cards come with enticing discounts and offers, making them a preferable choice for many. The integration of credit cards with UPI is poised to be a transformative development in India's digital payment landscape, benefiting both consumers and credit card companies. 
 
Top Six Reasons to Link Credit Cards with UPI Apps 
 
Now that you're aware of the changes regarding UPI payments, let's explore six compelling reasons to consider linking your credit cards with UPI apps: 

1. Conveniently scan merchant QR codes and make payments using your credit card through your preferred UPI app. 
2. After linking, securely handle mobile recharges, initiate telephone bill payments, or settle electricity bills using UPI apps. 
3. Using a credit card for UPI payments provides liquidity and allows you to earn reward points from your credit card provider. 
4. You no longer need to carry your physical credit card everywhere for transactions. 
5. If your credit card limit is exhausted, you can easily switch to using your linked debit card within the same UPI app. 
6. RuPay credit cards offer free UPI transactions up to ₹2000, enhancing cost-effectiveness. 

Why Credit Card Issuers Welcome the Change 
 
For small to medium-sized transactions, individuals often favoured UPI apps due to their widespread acceptance among small merchants. With this recent change, credit card issuers can tap into payments made to small businesses, potentially generating substantial monthly transaction volumes. 
 
Restrictions on Credit Card Usage for UPI Payments 
 
Regarding credit usage and credit cards, it's essential to address potential loopholes. The RBI has implemented the following restrictions to prevent misuse: 

1. Transfers from your credit card (RuPay) to your individual UPI ID are prohibited. 
2. You cannot make payments to other credit cards that have UPI integration. 
3. Making payments into someone else's credit card via UPI using your credit card is also not allowed. 
4. This facility doesn't permit money transfers to small merchants with UPI remittances less than or equal to Rs 50,000 per month. UPI-linked RuPay credit cards are specifically designed for payments to merchants. 

Things to Consider Before Linking Your Credit Card for UPI Payments 
 
If you're a new credit card user, exercise caution to avoid exceeding your credit limit. The absence of the need for funds in your bank account with this facility can lead to overspending. Additionally, be mindful of timely payments, as credit card companies impose high interest rates. Mismanagement could potentially lead to a debt trap. 
 
Is This a Game Changer? 
 
The integration of credit cards with UPI payments presents a significant development in the digital payments landscape, offering numerous advantages for both consumers and companies. However, as transaction volumes rise, the evolution of the entire system will be a crucial aspect to monitor. For now, this transition represents a positive move for everyone involved.

Disclaimer: The information provided in this article is generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. Hence, you are advised to consult your financial advisor before making any financial decision. IndusInd Bank Limited (IBL) does not influence the views of the author in any way. IBL and the author shall not be responsible for any direct/indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information.