Should You Link Your Credit Card With UPI? Here Are The Benefits And Drawbacks

The Unified Payments Interface (UPI) system has changed the landscape of digital transactions in India, facilitating real-time money transfers between bank accounts by way of mobile phone connectivity. 

Various UPI-enabled apps available in the Indian fintech market, including Paytm, PhonePe, MobiKwik, BHIM, and others, have enabled this digital shift. 

Credit Cards Now Linked To UPI 

Earlier, UPI transactions were limited to savings accounts or debit cards. However, a recent announcement by the Reserve Bank of India (RBI) has enabled an individual to link his/her credit cards to UPI. However, this development has brought forth another question - Should you link your credit card with UPI or not? Well, here’s a comparison. 

Advantages Of Linking Credit Cards With UPI 

1. Convenience 
Conventionally, credit card use was limited to merchants accepting card payments. By linking credit cards to UPI, users can also make payments at any merchant that supports UPI, including small businesses and peer-to-peer transactions. 

2. Reward Benefits 
An individual can earn rewards on their credit cards and also earn rewards on even the smallest transactions made via UPI. Many credit cards offer cashback of 1-5 per cent on purchases, and linking them to UPI ensures that users benefit from every payment.  

3. Increased Purchasing Power 

Credit cards come with higher limits compared to debit cards. When linked with UPI, users can make high-value purchases even if their bank balance is low. This is usually useful in case of emergency situations. 

Disadvantages Of Linking Credit Cards With UPI 

1. Risk of Overspending 
The convenience of UPI payments could lead to impulsive purchases. Since credit cards allow users to spend beyond their immediate means, they may end up accumulating significant debt unknowingly. 

2. Debt Trap 
Lucrative rewards programs may encourage an individual to spend more than they can afford. If they fail to clear their dues on time, they risk falling into a cycle of debt. 

3. High Interest Rates 
Credit card interest rates in India range from 18-48 per cent per annum. If users do not pay dues every month, they could risk paying more in interest than the actual transaction amount. 

Linking credit cards to UPI offers increased convenience and rewards. An individual should ensure they have sufficient funds to pay their credit card bills in full before the due date.