What Are UPI Credit Cards And How Do They Work?

UPI credit cards combine the convenience and use of the Unified Payments Interface (UPI) with the multiple functionalities of credit cards to make payments seamless, as well as completely cashless. In June 2022, the RBI permitted to link credit cards to UPI platforms, making life extremely convenient for those who also like making transactions on their smartphones.

Key Features of UPI Credit Cards

1. Interoperable Payments: Users no longer need to carry physical cards. Their credit card can be added to a UPI application like Paytm, PhonePe, or BHIM. Payments are effected by scanning a QR code and authenticating through a UPI PIN.

2. Pay on Credit: Unlike standard UPI transactions linked to bank accounts, UPI credit card payments allow users to make purchases even when their bank balance is insufficient, as payments are charged to the credit card.

3. Organized Statements: Credit card-linked UPI payments consolidate all transactions into a single credit card bill, keeping your bank statement clutter-free.

How UPI Credit Cards Work

Linking: Currently, UPI credit cards support RuPay cards. Users can link their RuPay credit card to a UPI app by selecting the card option during setup and verifying using OTP.

Usage: After linking, the user can initiate a payment at any UPI-enabled merchant through a QR code scan of that merchant's QR code. The amount will be deducted from the available credit limit.

Settlement: The monthly credit card bill will have each credit card payment made via UPI credited during the billing cycle, which can be settled.

UPI credit cards are especially advantageous for users who value convenience and organisation.

For example, if you send 100 micro-payments through a UPI app connected to your bank account, every transaction shows up separately in your bank statement. This will make a cluttered mess to track. On the other hand, a UPI-connected credit card merges all 100 payments in one single line on your credit card statement.

Several RuPay credit cards provide rewards on UPI transactions, for instance cashback, or loyalty points.

The Best of Both Worlds

UPI credit cards are actually a combination of the real-time convenience of UPI and the flexibility and rewards of credit cards. They simplify digital payments while giving users access to credit for emergencies or planned purchases.

Assume that you want to buy groceries but have insufficient funds in your bank account. Then you can pay immediately using the credit card and settle the amount subsequently through the credit card bill by availing the UPI-based credit card.

UPI credit cards are a new development in India's digital payments scenario as they synthesise the best of both worlds from both UPI and credit cards and enable effective, organised, and rewarding transaction management capabilities.