What are UPI credit cards? How are they changing the way we make payments? An explainer

If you are quite accustomed to making all your sundry payments via Unified Payments Interface (UPI) app and are unsure of changing this habit of yours to embrace credit card in the foreseeable future, then you may explore the idea of using UPI credit cards.

These are the cards that are used to carry out real time payments to merchants and small vendors via UPI app of a bank. But unlike in UPI where you must have money in your savings bank account linked to the app, here you can transfer the money you received on credit.

What are UPI credit cards?

One can use UPI through a number of mobile apps such as Paytm, PhonePe, MobiKwik, BHIM app and Airtel Money. Besides, a number of banks also offer their own UPI apps.

In June 2022, RBI allowed the linking of credit cards to UPI to enable seamless experience for UPI users. As many of us would agree that because of the hassle of using a physical card – from swiping it at a POS (point of sale) to sharing the OTP – that the card users, particularly in the young age group, have moved towards UPI.

However, with linking of credit cards to UPI, card users can literally have got the best of both the worlds. Not only can they make real time payments via smart phones but they can also add another filter of payment which will benefit them in two ways:

1. They can buy or make payment for some items even when they don't have money in their bank account at that moment. This can do this on credit.
2. Since all payments are collated and paid through credit card bill, their bank statement wouldn't get cluttered.

Let's suppose, you make 100 small transactions via a UPI app in a month, then at the end of the month, your bank statement will record all these 100 transactions separately. On the other hand, when you use a credit card for these UPI transactions, they are recorded in the credit card statement.

At the end of the credit card billing cycle, when you make payment for the same, only one transaction towards the bill payment will be recorded in the bank statement.

This is how UPI credit card works

I. Linking to UPI: The credit card is linked to a UPI ID instead of a bank account.

II. Transaction: When making a payment via UPI, the amount is charged to the credit card instead of being deducted from a bank account.

III. Repayment: The user settles the credit card bill as per the usual billing cycle.

RuPay has enabled linking of UPI apps to its credit card. So, one can link the UPI app on their smartphone to RuPay credit card offered by their bank.