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Linking RuPay credit cards to UPI: What you need to know

In June 2022, the RBI allowed RuPay credit cards to be linked to UPI. No other credit card has this facility. According to banking experts, allowing other networks to integrate with UPI will broaden the scope of digital payments, fostering competition and innovation.

March 05, 2024 / 12:20 PM IST
Linking credit card with UPI

Linking your credit card to UPI allows you to spend smaller amounts through your credit card.

Ever since the Reserve Bank of India (RBI) allowed RuPay credit cards to be linked to UPI in June 2022, those who own such cards have not needed to carry them on their person. RuPay credit cards linked to UPI have seen significant growth in the last couple of years—credit cards issued rose from 10 percent in 2022 to 25-30 percent within a year, according to the RBI.

HDFC MoneyBack Plus Credit Card, ICICI Coral credit card, SBI SimplySAVE credit card and Kotak League Platinum Credit Card are among the popular RuPay credit cards.

Sachetisation of credit

Linking your credit card to UPI allows you to spend smaller amounts through your credit card. At times, your local kirana shop might not have a Point-of-Sale machine or might not accept your credit card for small transactions, even if it has a POS machine. Here’s where your UPI comes in. Using it, you can make payments through your RuPay card. It also enables you to earn reward points.

Also read | Why credit cards on UPI is a game changer

“By focusing on the 'sachetisation' of credit, these measures make credit more granular and accessible, specifically catering to the needs of middle-income consumers who seek smaller, more manageable credit options rather than large sums,” says Kunal Varma, CEO and Co-Founder of Freo, a digital banking platform.

RuPay credit card 050324_001

Precautions to take while linking your credit card with UPI

Consumers engaging in regular UPI transactions should prioritise several precautions. Responsible spending aligned with budgetary limits is paramount to avoid incurring interest charges associated with credit usage.

Further, proactive transaction monitoring and regular review of credit statements are crucial to promptly identify discrepancies or unauthorised activity.

Stay alert to phishing attempts by verifying the source of any communication asking for financial details. “Vigilance against fraudulent activities is essential, encompassing the safeguarding of UPI PINs and OTPs and promptly reporting any concerns,” says Shikhar Aggarwal, Chairman of BLS E-Services, a technology enabled service provider to banks.

“Enable biometric authentication for transactions to enhance security,” Varma adds.

RuPay credit card 050324_002

What about Visa and Mastercard on UPI?

“The central bank has not given a specific timeline on when it will allow Visa and Mastercard to link their credit cards with UPI,” says Varma. The central bank typically considers factors such as security, interoperability, regulatory compliance, and the potential impact on the existing financial ecosystem before allowing such integrations, he adds. These measures ensure that the expansion of UPI to include other networks is beneficial, secure, and in line with India's digital payment goals.

“Allowing other networks to integrate with UPI will broaden the scope for digital payments, fostering competition and innovation,” says Varma. This could lead to improved services, lower transaction costs, and wider acceptance of digital payments globally, he adds.

It will also provide consumers with more flexibility in payment methods, potentially accelerating the shift towards a digital economy by leveraging the strengths of traditional credit card networks and UPI's widespread adoption in India.

Also read | UPI scams on the rise: Know how to protect yourself while making payments via UPI

Challenges in the context of credit-linked UPI

“Challenges include the imperative for robust data security and privacy measures to safeguard sensitive information,” says Aggarwal. Additionally, addressing the issue of financial literacy is crucial to educating users about responsible credit practices and mitigating the risk of over-indebtedness. “The seamless integration of credit systems from various banks and NBFCs into the UPI platform demands collaborative efforts,” Aggarwal adds.

Hiral Thanawala
Hiral Thanawala is a personal finance journalist with over 10 years of reporting experience. Based in Mumbai, he covers financial planning, banking and fintech segments from personal finance team for Moneycontrol.
first published: Mar 5, 2024 09:44 am

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