Understanding UPI on Credit Cards

Every day, several digital payments are processed by India’s payment systems and online payments via UPI (Unified Payments Interface) apps have become ubiquitous. To further boost the digital payment ecosystem in the country, the Reserve Bank of India (RBI) has allowed linking of Credit Cards to UPI.

While you use UPI to pay money from your bank account, you can now use UPI to pay with your Credit Cards. Again, with most of the shopping now done online, paying via Credit Cards through UPI has its own benefits. Read on to know how the combination will impact you.

You will be able to link your Credit Card to UPI from September 2022. But for now, you can only link your RuPay Credit Cards with UPI. At the time of payment, you will be required to select which account you would like to pay from (Debit or Credit Card). The linking will possibly push the usage of Credit Cards in the country.

However, there are certain things you cannot do with your UPI-linked Credit Cards; like you can’t transfer money to peers. UPI payment via Credit Card is supposed to bring out multiple benefits for merchants as well as users.

The usage of credit cards on UPI has some restrictions in order to prevent its misuse:

• You can't transfer money from your Credit Card (RuPay) to your personal UPI ID.
• You can't use your credit card to pay someone else's credit card through UPI if their credit card has UPI support.

• You will not be required to carry your physical Credit Card to make payments at shops:

Until now you were required to carry your Credit Card with you even for contactless transactions. But after linking your Credit Card with UPI, you will not be required to carry your physical card to the shop as you can simply scan the QR code at the merchant’s shop to make payment with your Credit Card. This will also significantly lower the chances of theft or loss of a Credit Card.

• You will build your credit history and credit score:

One of the benefits of Linking Credit Cards to UPI is it enables convenient payments and helps you build your credit history. By using Credit Cards for UPI payment, your credit utilization ratio will improve, which in turn will improve your credit score. By making your payments and paying your dues in full and on time, you can build a robust credit score that can come in handy should you need loans in the future.

• You will be able to make payments to almost all merchants:

Before RBI’s announcement to link Credit Cards to UPI, you were only able to make UPI payments through Debit Cards. But with UPI on Credit Card, you can pay merchants through UPI from your Credit Cards too.

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1. How to make UPI payments using credit cards?

• Get the UPI App: Start by downloading a UPI app on your smartphone. This app will let you use your credit card for UPI payments.
• Connect Your Credit Card: Once you have the UPI app, link your credit card to it. To do this, go to the "Add Payment Method" option in the app, choose "Credit Card," and provide your card details: card number, expiry date, and CVV. You'll also need to verify your card with an OTP sent to your registered mobile number.
• Create Your UPI ID: Now, create a UPI ID. Your UPI ID is a special code linked to your bank account, allowing you to send and receive money (in this case peer to peer transfer is not allowed). In the app's "Profile" section, select "UPI ID" and pick a unique ID made up of letters and numbers.
• Make a Credit Card UPI Payment: To make a payment using your credit card through the UPI app, follow these steps:
  • Open the UPI app and log in.
  • Scan the merchant’s UPI QR code OR enter your own UPI ID on online merchant’s payment page to receive a payment request.
  • Specify the amount you want to send.
  • Confirm the payment by entering the UPI PIN and wait for it to go through.

2. Can I transfer money from credit card to bank account without any charges?

Yes, you can transfer money from your credit card to your bank account via UPI, but it may not be free of cost. The functionality and charges for transferring money from a credit card to a bank account via UPI vary depending on the bank and the UPI app you use.

3. After a transaction is successful, how much time will it take for the money to be debited from the bank account?

After a successful UPI transaction, the money is typically debited from your Credit Card account almost instantly. UPI transactions are designed for real-time transfers, so you should see the deduction from your bank account balance immediately or within a few seconds of the transaction being completed. However, in some cases, it may take a minute or two for the deduction to reflect in your account statement or transaction history. The exact timing can vary slightly depending on your bank and the specific UPI service or app you are using.

4. What does a VPA/UPI ID/Virtual ID mean?

A VPA is a user-generated unique identifier that you create when setting up your UPI account. It's like an email address for your bank account. VPAs are designed to be easy to remember and share, making it convenient for users to send and receive money. VPAs typically look like "yourname@bankname"