Should You Link Your Credit Card to UPI? Here’s What You Need to Know

UPI (Unified Payments Interface) transactions have grown to supersede credit card transactions in an apparent change in payment behavior. According to the latest data from the Reserve Bank of India (RBI), UPI payments reached a record ₹2.34 lakh crore in October 2024, marking a remarkable 37% growth compared to the previous year. This quick increase has led many to wonder whether linking their credit cards to UPI is possible for convenience and ease.

Yet, is it a prudent decision to link your credit card with UPI payments? Let’s discuss the merits and demerits of such an approach to give you something to consider.

Advantages of Linking Your Credit Card to UPI

Increased Payment Flexibility: 1. Increased Payment Flexibility:

Flexibility is one of the main advantages of credit card payment for UPI payments. In contrast to debiting UPI payments that immediately derive from the user’s bank account, a credit card offers a credit line that is later repaid from the user’s account, which provides us with much more control over finances. That will be especially meaningful when you do not have enough money in your deposit account when the payment is due.

Decluttered Bank Statements: 2. Decluttered Bank Statements:

It appears on your bank statement whenever you directly debit from your savings account using UPI. However, for UPI, the payment will be recorded only if you buy with a credit card tied to UPI. This could be used to clean up your bank statement (i.e., information noise reduction) and achieve the purpose of expense tracking.

Consolidated Payment Method: 3. Consolidated Payment Method:

Most people use credit cards for larger payments and rely on their bank accounts for everyday transactions. Thus, by connecting your credit card to UPI, you can simplify all your payments as a single process, which improves transactions in terms of convenience and efficacy. Anything from paying for groceries to paying bills to buying items can all be done via UPI-linked credit cards (cc).

Potential Rewards and Offers: 4. Potential Rewards and Offers:

Several credit cards offer cash back, rewards, or rebates on purchased goods. Connecting your credit card to UPI preserves your ability to receive these rewards on your typical purchases, profiting from its benefits. However, this depends on the card issuer, and you can receive personalized offers associated even with UPI transactions, which improves the incentives to use UPI for payment.

Disadvantages of Linking Your Credit Card to UPI

Risk of Overspending: 1. Risk of Overspending:

One of the downsides of using a credit card for UPI payments is the temptation to overspend. Losing track of spending may be a simple result of the amount not being charged automatically to the user’s bank account. Beware; if not careful, this may result in debt and subsequent high-interest charges on your credit card balance.

Technical Issues and Errors: 2. Technical Issues and Errors:

Using a UPI-linked credit card as a sole payment solution can be a disaster if technical problems or errors occur (e.g., problems in the UPI system or the payment gateway of the credit card issuer may not allow the transaction to proceed. This could lead to frustration or no payment. Hence, a fallback payment scheme is vital in this case.

Limited Bank Support: 3. Limited Bank Support:

However, not all banks provide the provision to bind the credit cards to UPI. If your bank is not on board, then you may not be able to enjoy the utility of using a credit card for UPI transactions. On the other hand, not all credit cards can be used for UPI enrollment, so your choice will be limited.

Potential to Miss Out on Other Credit Card Benefits:

In the case of UPI transactions using only a credit card, there is a possibility of missing out on the benefits associated with other offerings of the same credit card. For instance, certain credit cards may offer special rewards, discounts, or benefits programs with purchases, such as travel or eating out. Note that if the credit card is used exclusively for UPI dealings, then the maximum potential of such schemes might be limited.

Conclusion: Is It a Smart Move?

Linking your credit card to UPI offers various advantages, including versatility, speedy payment, and the potential for reward points. However, there is the added risk and the attendant risk of overspending, technical failure, and loss of functionality around other credit card amenities. If this option is to be fully exploited, then factors to bear in mind include spending patterns, the selection of a trustworthy bank and card issuer, and adequately managing money to prevent debt formation.

Deciding whether to register your credit card with UPI is a matter of individual preference and financial objectives. Good spending management lets you benefit from the features of a single payment system, which may be of particular interest to you (a proposition). However, please be careful of the potential risks and use credit wisely.

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