Is It a Good Idea to Link Your Credit Card to UPI?

Millions of people in India now use UPI apps for making payments and doing transactions online. The QR code can be seen everywhere, right from a cash counter of a franchisee of an international fashion brand to a street hawker's handcart. The UPI is widely accepted by merchants and customers because it is a convenient way to make a payment that ensures the security of the transaction.

UPI payment is considered a secure way to transact cashless as it transfers money through your Virtual Payment Address (VPA) and uses two-factor verification and merchant authentication for added safety. Earlier, UPI payments could only be linked to the savings bank account/s through a debit card/s. So, the money would get debited directly from your bank account.

To make the UPI useful and increase the penetration of RuPay credit cards, in June 2022, the Reserve Bank of India (RBI) allowed credit cards to be linked to the UPI to make UPI payments. To ensure the security of the transactions, the central bank started this facility phase-wise, making RuPay credit cards the first ones to get enabled with it. Now, the facility is extended to many credit cards providers, such as HDFC, HSBC Visa, SBI, and Kotak Visa, among others.

That said, credit facility on UPI is not an entirely new concept. Many fintech companies in India, such as LazyPay, Simple, Jupiter Edge, etc., allow users to pay with credit at any merchant that accepts UPI payments through a QR code. However, these apps offer a low credit limit and a short repayment period of 15 to 30 days.

Credit cards work on a deferred payment basis, which means you can use the product or service today and pay for it later without extra charges. Besides, credit cards offer attractive offers and discounts for purchases made at certain merchants. Hence, many individuals prefer to use their credit cards for luxurious purchases as well as day-to-day transactions. Linking credit cards to the UPI apps has helped in increasing the RuPay credit card penetration, and it is slowly changing the credit card game in India.

Since a large populous in India prefers UPI over swiping their debit and credit cards at PoS, the facility to make credit purchases through UPI is an added advantage to them. They can take advantage of the credit card benefits like a wider interest-free period and reward points on purchases while making an easy and convenient purchase through UPI. The credit card integration with UPI is also encouraging more customers to use digital payment modes.

Here are the 8 great benefits of linking your credit card to UPI apps:

• The NFC-enabled portals offer a one-tap-and-pay function that allows you to pay with a single tap.

• You can simply scan the merchant QR code and make payment from your credit card through your preferred UPI app.

• You can make payments like mobile recharges, electricity bill payments, and telephone or post-paid bill payments with utmost security from UPI apps.

• It can also be used at online merchants who accept UPI payments.

• You do not miss credit card reward points and offers when making UPI payments.

• Apart from the credit card rewards, you may also get unique UPI offers, rewards, and cashbacks.

• You are not required to carry your credit card everywhere you go.

• When making the payment with UPI, you can choose whether you want to use your credit card or other registered debit cards.

Join Now: PersonalFN is now on Telegram. Join FREE Today to get 'Daily Wealth Letter' and Exclusive Updates on Mutual Funds

But there are certain limitations of linking your credit card to UPI apps:

• You can use credit cards through UPI only at merchants who accept UPI payments through QR codes.

• The facility cannot be used for transferring money to your e-wallet or savings bank account.

• Unlike a debit card, it does not allow you to transfer money to anyone's bank account.

How to link your credit card to the UPI app?

While the process to link your credit card to the UPI app may slightly vary from UPI app to UPI app, you can follow these basic steps and get your credit card linked to your UPI app:

• Open the UPI app on your Android or iOS smartphone.

• Tap on your Profile (usually located in the screen's upper right/left corner).

• Go to Settings - Payment Methods - Credit/Debit Card.

• Enter your name as mentioned on the credit card, billing address, card number, card expiry date, and CVV.

• The UPI app will contact your bank and confirm the information (typically takes a few seconds for verification).

• You will be asked to provide a One-Time Password (OTP) for additional authentication.

• Your card will be added to the UPI app.

• Tap on Activate and enter the OTP to enable the credit card on the UPI app.

Is it a good idea to link your credit card to UPI?

Making bank-to-bank fund transfers or payments has never been so easier! Linking credit cards to make UPI payments is undoubtedly a game changer in digital payments as it offers the benefits of both worlds; credit cards and UPI.

However, it is crucial to make wise use of the facility. Remember that when you use a credit card, you opt for short-term credit. As you do not have to spend the actual money from your pocket, you tend to spend more than your budget. The ease and convenience of using credit cards for UPI payments can increase your shopping habits. This can make you forget the debt you have created and tempt you to splurge more. A lack of financial discipline can make you fall into a debt trap.

If you are financially disciplined and have control over your credit spending, the credit card UPI can make your shopping experience simpler. However, if you lack financial discipline, it ca n put you in a financially challenging situation. Hence, to avoid it, it is advisable to prefer linking your bank account or debit card to make UPI payments and use your credit card UPI only for emergencies.

KETKI JADHAV is a Content Writer at PersonalFN since August 2021. She is an MBA (Finance) and has over seven years of experience in Retail Banking. Ketki specialises in covering articles around banking, insurance, personal finance, and mutual funds and has been doing it for over three years now.