Should you add your credit card on UPI? Is it a smart move for you?

Should you add your credit card on UPI? Is it a smart move? | Vrid

In the world of personal finance, there’s a constant quest for convenience, security, and simplicity. In the Indian context, the Unified Payments Interface (UPI) has been a game-changer, making digital transactions a breeze.

But what happens when you mix UPI with credit cards? Can you add your credit card on UPI? What are the benefits and disadvantages of doing so?

Let’s find out if adding your credit cards on UPI is a smart move for you.

Estimated read time: 3 minutes and 21 seconds

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Buckle up. Here we go!

Can you add your credit card on UPI?

The short answer is yes, you can add your credit card on UPI, but there’s a catch. 

Currently, you can only add your RuPay credit cards on UPI. And to be honest, we don’t know whether the RBI will allow credit cards of other card networks like Visa and Mastercard to be added on UPI.

So, if you have a RuPay credit card, you can add it on any UPI app you like. Check this video to learn how to link your RuPay credit card on UPI.

And if you don’t have a RuPay credit card, you can wait till Oct 1st, 2023, to switch your credit card network from any network to RuPay. Or you can apply for a new RuPay credit card as well. 

But wait. Before adding your credit card on UPI, you should know the benefits and disadvantages of adding your credit card on UPI.

Benefits of adding your credit card on UPI

UPI’s hallmark is convenience. By adding your credit card on UPI, you can add more convenience to your credit card payments, too. You don’t have to carry your credit card anymore.

And by adding your credit card on UPI, you can make credit card bill payments directly from your linked bank account from your UPI app. You can also view both credit card UPI and bank UPI transactions in one place.

To incentivise you to add your RuPay credit card on UPI, RuPay, along with banks, can provide exclusive rewards and cashback offers for UPI transactions.

Since RuPay cards have lower MDR rates when compared with Visa and Mastercard, more merchants will be willing to accept payments from RuPay credit cards. And they won’t need a swipe machine for this. A QR code is enough.

Disadvantages of adding your credit card on UPI

The ease of UPI transactions might encourage impulsive spending. Since you’re using your credit card, it’s easy to forget that you’re borrowing money that needs to be repaid.

If not managed carefully, adding your credit card to UPI could lead to higher credit card debt. This can spiral into a financial burden because of the typically high-interest rates on credit cards.

We often use credit cards for the rewards and offers we receive with it. Currently, when compared with Visa, Mastercard and other cards, rewards and offers on RuPay cards are low.

Not only this, we have noticed some banks silently add a limit on rewards earned on UPI transactions using your credit card. For example, with HDFC RuPay credit cards, you can only earn a maximum of 500 reward points in a calendar month on UPI spending.

Should you add your credit card on UPI?

Generally, we would have said the decision to link your credit card on UPI depends on your financial habits, goals, and discipline. You can add your credit card on UPI if you’re a responsible spender who pays off credit card dues in full each month and wants to simplify bill payments and enjoy UPI’s convenience for credit card transactions.

But adding your credit card to UPI is a double-edged sword. It offers the convenience of seamless transactions at the risk of overspending and receiving lower rewards and offers.

See, in a previous post, we explained how, along with the Indian Government and RBI, NPCI is struggling to increase RuPay’s market share in the credit card segment. So, they have allowed you to add your RuPay credit cards on UPI.

They are also allowing you to switch between card networks hoping all this will lead to an increase in demand for RuPay credit cards. This is good for the merchants, as this translates to lower MDR and higher profit.

But what about you?

Apart from the convenience, we don’t see any significant benefit for you to add your credit card on UPI. If you struggle with credit card debt and might be tempted to overspend, this can cause a big problem.

Therefore, we wouldn’t recommend adding your credit card on UPI.

That’s it for today, buddies. Stay tuned for more insightful newsletters on personal finance topics that matter to you.

Remember to share these insights with your buddies. Until next time!

Still Curious?

If you are like me, who likes to analyse a little more or check out content in different formats, well you are in luck. Below you can find some suitable content we found.

RuPay – RuPay credit card on UPI

Moneycontrol – Making UPI payments via RuPay credit cards: Is it worth it?

Outlook – What Are Newly Proposed MDR rates For UPI-linked RuPay Credit Card transactions?

Note: We don’t have any affiliation with them. We are sharing links only for educational purposes. The opinions expressed by them belong solely to them and do not reflect the views of Vrid.

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DISCLAIMER: This newsletter is strictly educational and is not an investment advice or a proposal to buy or sell any assets. Please be careful and do your own research.

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