UPI has made digital payments and fund transfers simpler, and now you can link your credit cards to it, thanks to RBI's recent approval. UPI has become the most preferred transaction channel for consumers for digital payments.
Says Rahul Jain - Chief Financial Officer (CFO), NTT DATA Payment Services India: “UPI has become the most preferred transaction channel for consumers for digital payments. The linking of credit cards to UPI would add to the convenience for consumers, who would not need to use their physical card.
Additionally, this would also add to safety with card data securely in the hands of the users and make the QR code ubiquitous for credit card-based payments in times to come.
This will help drive digital payment acceptance to the next level with increasing penetration across any city and town wherever it is difficult to roll out point-of-sale (POS) terminals.”
But, as with any change, there are both advantages and disadvantages to consider.
Advantages of Linking Credit Card to UPI
Multiple Transactions: Users can see multiple transactions in his/her bank statement. Linking the credit card to UPI, all the transactions will be reflected on the credit card instead of the bank account.
Time To Repay: At present, whatever payments the user makes, the amount gets deducted instantly from the bank account. By linking credit cards to UPI, it will give the user a credit base of those payments which means the user will get time to repay the amount.
Rewards: Some credit cards offer rewards, cashback, or other benefits for using UPI transactions linked to the card where users can take advantage of these incentives.
Convenience: “Linking a credit card to UPI offers convenience, allowing users to make seamless and quick transactions. Users can make payments directly from their credit card without the need for physical cards. In India, virtual cards are not very popular but in UPI, Rupay made it a reality for retail virtual cards,” says Jain.
Wider Acceptance: UPI is widely accepted across various platforms and merchants, making it convenient for users to make payments using their linked credit cards.
Disadvantages of Linking Credit Card to UPI
Available On RuPay Credit Cards: First, it is very important to know that linking of credit cards to UPI is only available on RuPay credit cards as Master Visa or American Express cards are still not accepted. This poses a major drawback for many users.
Transaction Fees: “Yes, there is a Merchant Discount Rate (MDR) which will be charged to the merchants and not to the users. This means merchants will have to pay more when people use credit cards on UPI. In such scenarios, some merchants have not enabled the option of linking credit cards to UPI,” adds Jain.
Low Acceptance: As UPI is free, many merchants using the app have the option to disable the acceptance of credit card payments on UPI due to the charges involved in it. In some cases, if the user is going to the merchant for the payment and the merchant is using a single or individual QR, here the user’s payment through a UPI credit card will not be accepted.
UPI On Credit Cards Cannot Be Used For (Peer-To-Peer) P2P Payments: Merchants have individual UPI IDs where UPI acceptance on credit cards is not possible like small merchants who use individual UPI ID, in such cases the user’s payment will not be accepted.
