Mudra Compass

Unified Payments Interface (UPI) has revolutionized the way Indians make digital transactions, offering an easy, instant, and secure payment system. Whether you’re buying groceries, paying utility bills, or sending money to friends, UPI has become a default choice for millions. Traditionally, UPI transactions were linked only to savings or current bank accounts. But with the recent developments by the Reserve Bank of India (RBI) and National Payments Corporation of India (NPCI), you can now link your credit cards to UPI apps.

This move is not just a technological upgrade; it has wide-ranging implications for consumers, merchants, and the broader financial ecosystem. In this article, we explore how this works, the benefits, potential risks, and what Indian users should know before they start using credit cards on UPI platforms.

How It Works: UPI via Credit Card

As of now, RuPay credit cards are the only ones allowed to be linked with UPI. Other card networks like Visa and Mastercard may be integrated later, depending on regulatory approval and ecosystem readiness.

To use your RuPay credit card for UPI payments, follow these basic steps:

1. Open your UPI-enabled app (like PhonePe, Google Pay, BHIM, Paytm).
2. Go to the ‘Add account’ section and choose ‘Link Credit Card’.
3. Select your bank and the RuPay credit card you want to link.
4. Authenticate using OTP and set your UPI PIN.

Once linked, you can use your credit card just like a bank account for making UPI payments at merchant outlets, online shopping platforms, and QR code-based transactions.

Benefits of Using Credit Cards on UPI

1. Extended Credit Period – One of the biggest advantages of using a credit card is the interest-free period. This feature is now available even for UPI transactions, giving users more flexibility to manage their cash flows.
2. Reward Points & Cashback – Many credit cards offer reward points or cashback on every transaction. When you use your credit card for everyday UPI transactions, you could be earning more benefits than with a regular bank account.
3. Higher Spending Limit – Savings accounts usually have daily or monthly transaction limits. Credit cards typically have higher limits, which is beneficial for high-value purchases or emergencies.
4. Convenient & Seamless Payments – Users can now enjoy the seamless UPI experience — QR code scanning, quick payments — without being limited by their bank account balance.
5. Boost for Merchants – Small and medium-sized businesses can accept credit card payments via UPI without the need for a costly Point-of-Sale (PoS) terminal. This opens up a wider customer base for them.

Who Can Benefit the Most?

• Frequent shoppers who want to earn rewards on every purchase.
• Small business owners looking to accept more payment options without extra hardware.
• Credit-savvy users who pay their bills on time and want to use the grace period to manage cash flow.

Limitations & Things to Watch Out For

1. Merchant Restrictions – Not all merchants are accepting UPI payments via credit card yet. The rollout is still in progress, and smaller shops might not be aware of or equipped for it.
2. No P2P Transfers – You can’t transfer money from your credit card to another person’s account via UPI. The functionality is strictly limited to merchant payments (P2M – person to merchant).
3. Interest Charges & Penalties – If you don’t pay your credit card bill on time, you’ll be hit with high-interest rates, typically 36–42% annually. This can wipe out any benefits you gain from reward points or cashback.
4. Limited to RuPay Cards (for now) – As of mid-2025, only RuPay credit cards are allowed to be linked with UPI. While RuPay adoption is growing, Visa and Mastercard still dominate the market, limiting the immediate reach.
5. UPI App Compatibility – Not all UPI apps support credit card linkage yet. You may need to try different apps or wait for updates to enable this feature.

Security Considerations

Using your credit card on UPI platforms involves the same UPI PIN-based authentication process, ensuring security. However, with credit cards, the stakes are higher due to the risk of overspending and fraud. Here are a few tips:

• Enable transaction alerts for all payments.
• Set transaction limits using your UPI app or bank settings.
• Never share your UPI PIN or card credentials with anyone.

What Does This Mean for India’s Digital Economy?

Allowing credit cards on UPI is part of India’s broader push toward a cashless economy and financial inclusion. It promotes digital transactions in semi-urban and rural areas, reduces dependence on cash, and increases credit penetration in a responsible way. It also enables a win-win scenario for all stakeholders — consumers enjoy greater convenience and rewards, merchants receive faster payments, and banks witness more credit card usage.

Conclusion

The integration of credit cards with UPI is a milestone innovation in India’s digital payments landscape. It combines the widespread acceptability of UPI with the benefits of credit cards, creating a powerful financial tool for Indian consumers. However, like any credit facility, it must be used wisely.

Before jumping in, understand the terms and charges, ensure timely repayments, and use it primarily for merchant transactions. As this ecosystem matures, we can expect broader acceptance, new features, and perhaps even integration with more card networks.

For now, if you have a RuPay credit card, linking it to UPI could be a smart move — provided you manage your credit responsibly.