Linking Your Credit Card To UPI: Pros And Cons

Linking credit cards to the Unified Payments Interface (UPI) has added more convenience to users by simplifying the process of digital payments and fund transfers. Users are not charged any fees for linking or using credit cards for transactions.

How It Is Different 

Transactions for UPI credit cards and debit cards differ in several ways. “A UPI credit card transaction utilizes borrowed money from the users’ credit card issuer, allowing them flexibility in repayment while in a debit card transaction, the amount is directly deducted from the users’ bank account. More importantly, if the user has no balance in the account, the payment can be made easily by UPI credit card. For debit card transactions, funds should be available in the account to make payments,” says Rahul Jain, CFO, NTT DATA Payment Services India. 

Fees Involved 

When you link your credit card to UPI, it's important to understand the fee structure, which can differ from using your debit card. 

While debit card transactions are typically free on UPI platforms, credit card usage might involve certain charges. These could include transaction fees levied by your bank or credit card issuer, which can vary depending on the specific card and bank policies. 

“Also, remember that standard credit card terms still apply; if you don't pay your balance in full each month, you'll be charged interest on the outstanding amount. Lastly, be mindful of cash advance fees if you use your credit card for ATM withdrawals via UPI,” says Prashant Kumar, Founder and CEO, Kredit.Pe, a Bangalore-based fintech company. 

Be Secure 

In terms of security, debit cards are directly linked to the users’ bank account which means if any fraud happens, it can impact the actual funds. Whereas transactions made using UPI credit cards, chances of fraud are less and the responsibility to provide better fraud protection may fall under credit card issuer policies. 

However, it is very important to use trusted UPI apps and allow them to read your SMS, contacts, and call history to link your credit card. Make sure to use strong authentication and PINs. “Set up a unique UPI PIN to authenticate credit card transactions on UPI and at the time of linking your credit card on UPI. Ensure that the device is secure, and apps are updated to protect against any vulnerabilities,” says Jain. 

Users should avoid using public or unsecured Wi-Fi networks, and instead always use mobile data or a trusted Wi-Fi connection for making financial transactions. Make payments only to merchants using credit cards on UPI and enable credit card security features like CVV, OTP verification, and SMS alerts to enhance security.

UPI has a daily limit of Rs 1 lakh and within this limit credit cards can be used. If the credit card limit is available for the user, he or she can use the entire card limit. 

“However, it's important to be aware of the potential risks. These include possible transaction fees associated with credit card UPI payments and the risk of overspending, which can lead to debt accumulation,” says Kumar. 

In order to avoid overspending, the user can set the spending limit, or the bank can set the card limit.