Integrating UPI with credit cards has many benefits. It will increase the usage of cards at smaller outlets, thus enabling the management of one’s cash flow without breaking the bank. UPI transactions are easy to use for both the sender and the receiver, and they come with lower costs. There are many more such benefits which is why credit cards on UPI are a game changer. Let us see how? 

Major Pros and Cons of Linking Credit Cards With UPI 

For Customers: 

Pros

  • Customers can use their credit cards at any merchant accepting UPI payments be it the vegetable seller, fruit vendor, or street food outlet. They can thus make small ticket purchases using credit cards without having the need to use their bank balance. Moreover, they don’t have to carry their credit cards with them all the time thereby minimizing the loss of the card or credit card frauds.
  • UPI transactions are safer and more secure as the customers don’t have to swipe the card at a POS terminal. They are thus less likely to be exposed to the dangers of spoofing. 
  • It improves your credit score
  • You get a lot of discounts, rewards and cashback. 

Cons

  • Since all the spends can now be charged to the card, there could be a risk of overspending. 

For Merchants

Pros

  • Merchants don’t have to spend on POS machines and for those who have both, the systems can coexist. The payment process will also be very fast. 
  • UPI is live in 330 banks now, and this will provide credit card access to a wider range of customers. It will in turn provide greater retail potential. 

Cons

  • Local merchants and shopkeepers may have a lesser inclination to embrace the notion of UPI-linked credit cards due to high merchant discount rate (MDR) fees. 

For Card Issuers

 Pros 

  • This will improve spending, especially for smaller merchants who do not have the facilities to accept credit card payments. This will also help activation and engagement as customers across demographic profiles will find several new chances to use their cards. 

Cons

  • Spends from small merchants will not fetch any interchange income and this could reduce the interchange income from bigger merchants as well if not classified properly. Also, linking credit cards with UPI will open up a whole new set of use cases, which will call for enhanced fraud risk management. 

How Does UPI on Credit Cards Improve Your Credit Score?

The credit score is a key factor in the approval of loans and credit cards. It indicates your creditworthiness. The primary benefit of paying through your UPI with your credit card is that it improves your credit utilization. This in turn improves your credit score. For someone with a poor credit score or a budding credit history, UPI gives opportunities to use their credit card and build their credit score. 

So, Is Credit Cards on UPI a game changer? 

Linking credit cards with UPI has its share of pros and cons. So, will credit cards on UPI act as a game changer?

  • Firstly, will people who belong to the risk-averse Indian segment be fine with accepting this payment approach? They may not because a credit card whether it is used as such or through UPI is still a debt. There will be interest on the outstanding amount, annual maintenance fees, and charges. Additionally, it demands self-discipline to handle a credit card. 
  • Secondly, will retail merchants embrace it actively?  Maybe or maybe not. UPI is a free mode of payment whereas credit cards come at various prices. So, customers are more likely to prefer UPI which is why online stores, shopping malls, and big supermarket chains are likely to implement it. On the other hand, local shopkeepers, store owners, and other merchants may not implement this due to high merchant discount rate (MDR) fees. 
  • Whatever may be the cons, the benefits are greater than the cons, and credit card on UPI is a game changer. The linking of credit cards to UPI is a part of the digital revolution which was catalyzed by factors like the pandemic, demonetization, government efforts, direct benefit transfers, no-frills accounts, etc. The QR code which is present at almost every merchant is enough evidence that UPI is acting as a game changer. 
  • The growth of UPI has been very rapid since its launch in April 2016. As per the NPCI website, approximately 90,000 transactions (across 21 member banks) for Rs. 38 lakhs in July 2016 have increased to a whopping 7.8 billion transactions (across 382 member banks) for Rs 12.8 lakh crore in December 2022.

Conclusion

UPI has become very popular and universal nowadays. Most merchants right from street vendors to e-commerce giants accept UPI payments. Both the quantity and value of UPI transactions have increased steadily since its launch. Hence, It is indeed a game changer. It is time to use this facility judiciously and reap the benefits. 

 

FAQS Why Credit Cards on UPI is A Game Changer

1:How UPI on credit cards can help in improving your credit score?

Paying through UPI on your credit card will improve your credit utilization. This in turn will increase your credit score. 

2:What is the limit of UPI on a credit card?

UPI linked credit cards allow only payment to merchant transactions, and such transactions follow the UPI standard transaction limits. The transaction limit per card per day is Rs 1 lakh, and the upper limit is Rs 2 lakh per transaction for verified merchants in particular categories.

3:Is it good to use a credit card for UPI payment? 

Credit cards on UPI come with several benefits like a bigger interest free period and reward points while making purchases through UPI. The credit card integration with UPI is also encouraging more customers to use digital payment modes.  

4:Can I use a credit card for GPay?

You can use a credit card or debit card added in Google Pay for the following types of transactions - Tap & pay (NFC) Bharat QR. In-app merchants.