Do You Use Credit Card On UPI? Know These Effective Strategies To Ensure Timely Bill Payments

The ease of using credit cards can be a double-edged sword. While having credit when cash flow is low can be helpful, it is important to understand that at the end of the day, credits are nothing but loans. Eventually, you have to pay back that money on time or bear a penalty for late payment, even if you are only a day late.

Recently, the ease of credit has been more convenient than ever before with the facility of ‘Credit Card (CC) on UPI’. CC on UPI allows customers to link their credit cards to their UPI apps, enabling direct payments to merchants without the need for physical cards.

A recent report by Kiwi, a credit-on-UPI platform found that around 78 per cent of its user base, majorly young adults below the age of 40 are increasingly moving towards the adoption of CC on UPI. It is fast becoming the primary mode of payment, wherein the users are spending over Rs 22,000 every month. The average number of payments using a CC on UPI is 21 per month.

Such data points towards the growing adaptability of using credit via the UPI facility. Says Chandralekha M R, (CMA, CIA) and founder of Dime, a personal finance platform: “CC linked to UPI provides seamless transactions, especially to small vendors who may not typically accept credit cards. For instance, one can easily pay for local services, and street food, or purchase grocery items from small shops using UPI with their credit card.

However, even small transactions can add up if one is not careful enough. “You might think, it’s just Rs 500, but several such transactions can easily breach your monthly repayment capacity, resulting in debt accumulation and high-interest payments,” she says.

She suggests a few strategies to ensure timely credit card bill payments when using UPI:

Set UPI Reminders: You can set up payment reminder features on UPI apps. For instance, set a reminder five days before your credit card due date. This will help you prepare the necessary funds or adjust your spending in advance.

Maintain An Emergency Buffer: Users should keep a separate emergency fund in their UPI-linked account. For instance, if one spends Rs 20,000 a month, they can maintain an extra Rs 5,000 to ensure they don’t miss out on credit card bill payments.

High-Interest Payments First: If you find yourself in multiple debts, prioritise paying off the one with the highest interest rate. Chandralekha suggests focusing on clearing a card with a 40 per cent annual rate of interest over a card with a 30 per cent rate to minimise interest charges.

How To Balance Convenience Of CC On UPI With Disciplined Spending?

• As a responsible user, one should link only one credit card to their UPI app. This can help them reduce the temptation to overspend.

• Try not to max out your credit limit. If your credit limit is Rs 1 lakh, make sure you do to exceed Rs 30,000 or Rs 40,000, as such discipline would help you maintain a healthy credit score and avoid over-leveraging.

• Regular credit card users should make it a habit to review their transactions weekly, if not daily, through the UPI app. This is important for those who have a habit of making multiple small transactions that result in impulsive purchases. Such impulsive spends are typically made on food or clothes, which add up to a significant amount. Once identified, you can work on cutting down on discretionary purchases using credit cards.