How UPI Payment Through A Credit Card Works In India: All You Need To Know

In December 2024, Unified Payments Interface (UPI) payments in India reached 16.73 billion, an 8% rise from the previous month. UPI payment through a credit card is reshaping the financial system and influencing the way you manage your daily expenses.

The integration of credit cards with UPI brings great convenience. You can make instant payments through UPI-enabled apps while using credit cards. This change combines speed and flexibility and improves both online and offline payment experiences. 

To fully join this trend, you need to know how to link your credit card to UPI and the process of using it. Here’s everything about how it works. 

UPI is a real-time payment system that enables instant fund transfers through mobile apps. In India, this is one of the most popular payment modes. Some key points about UPI are:

• You need to download a UPI app and link your bank account on it

• Some popular apps in India include PhonePe, Paytm, BHIM, Google Pay, etc.

• There are some bank-specific UPI apps, too, which provide specific benefits

• The payment is done by using a UPI number, UPI ID or by scanning QR code

• Payments are secure, convenient, and usually free of cost

Earlier, UPI supported only savings accounts and debit cards. In 2017, the Reserve Bank of India (RBI) allowed credit card linkage with UPI and more recently, using RuPay credit cards. 

To encourage seamless digital payments, the National Payments Corporation of India (NPCI) introduced RuPay Credit Cards. This payment network allows you to make UPI payments directly from your credit card without any need to transfer funds from your bank account. 

This helps bypass the issue that Visa and Mastercard credit cards don't allow you to transfer funds by scanning a QR code. Similar to any other payment network, RuPay credit cards are available in multiple variants, such as: 

• Classic: Known for deals and discounts from merchants that help you save as you spend

• Platinum: Has multiple merchant partnerships across varied categories for even more offers 

• Select: Offers exclusive privileges, experiences, and perks to uplift your lifestyle 

As of now, you can get a RuPay credit card instantly if you are an existing cardholder of a credit card from a variety of banks. These include: 

• Axis Bank

• BOB Financial Services Ltd

• Canara Bank

• Federal Bank

• HDFC Bank

• ICICI Bank

• Indian Bank

• Kotak Mahindra Bank

• Punjab National Bank

• RBL

• Saraswat Co-operative Bank Ltd 

• SBI Cards

• Union Bank of India

• Yes Bank

You need to link your RuPay credit card to your UPI ID before making transactions. Once it is linked, you can complete digital payments using your credit card balance.

The following are the steps to link your credit card with the UPI:

1. Download a UPI app if you are new to UPI.

2. Open the app, go to a section called Add payment method, and select the credit card option. 

3. Enter your card number, CVV, and expiry date.

4. Verify your card with the OTP sent to your registered phone number.

5. Create a UPI ID linked to your credit card. 

The following steps describe how to make a UPI payment through a credit card:

1. Scan a QR code or select options like Pay by phone number or Pay contacts..

2. Input the transfer amount.

3. Select your credit card as the payment method.

4. Enter your UPI PIN and complete the payment.

Linking your credit card with UPI improves the way you make payments and comes with numerous advantages, such as: 

• Convenience

After linking your credit card to UPI, you can use it for any payment that supports UPI. This includes online payments, peer-to-peer transfers, and everyday purchases. You don’t have to plan your purchases with the restriction of using credit cards only at select outlets.

• Rewards

Many credit cards offer cashback, reward points, travel points, dining perks, and shopping benefits on transactions. Based on the issuer’s offer policy, by linking your card with UPI, you can gain these rewards even on everyday small-value payments.

• Higher Credit Limits

Credit cards usually provide higher limits to those who have a good financial profile. Linking them with UPI will allow you to make large purchases, even when your bank balance is low. This makes it easier to handle urgent or high-value expenses.

Linking credit cards with UPI does come with several disadvantages. These include overspending risks, chances of falling into debt, and high interest charges. Here’s a look in detail: 

• Risk of Overspending

Wide merchant acceptance of UPI in India makes it easy to accumulate balances without realising the extent of expenses. The ease of UPI payments can also increase the tendency to spend beyond your means. 

Credit card limits are a type of borrowed funds, which means they allow you to spend money you do not currently have. If you do not pay your bills in full, you attract high interest charges. 

• Debt Trap 

Many credit cards offer attractive rewards such as cashback or reward points for a certain amount of spending. These benefits may tempt you to spend more through UPI even when you cannot repay the full bill. Over time, this habit can lead to a debt trap.

Here are some tips for safer use, like:

• Avoid exceeding your credit limit when using UPI-linked credit cards, and keep the utilisation lower than 30%.

• Use only UPI apps approved by NPCI and download them from official app stores.

• Set a strong PIN to protect personal data, prevent fraud, and ensure secure transactions.

Credit cards and UPI continue to be essential financial tools, and their integration allows you to pay digitally without carrying the physical card. However, it is important to be aware of potential drawbacks. 

Will UPI payments via credit card reflect in my credit card statement?

Yes, just like any other transaction, your credit card statement records every payment made through UPI.

Are UPI credit card transactions faster than traditional credit card payments?

Yes, regular transactions require swiping, tapping, or entering OTPs, which takes more time than UPI payments, which are near instant. 

Does using a credit card for UPI transactions impact my credit score?

The transaction process does not impact your credit score. But as it is a credit product, credit bureaus will record your usage just as they do with traditional credit card transactions. 

Can I earn reward points on UPI payments made through credit cards?

Yes, you can maximise your benefits by earning reward points by spending based on your issuer’s policy.

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