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'If you are not prudent, you may exceed your budget, and if it happens too often, you may end up in debt.'
According to the credit card trends report for 2024 by Kiwi, a credit-on-UPI (Unified Payments Interface) platform, UPI-enabled credit card users carry out an average of 40 transactions per month -- eight times more than traditional credit card users.
Rupay credit cards expanded their market share from 3 per cent in 2023 to 12 per cent in 2024, driven by the growing adoption of UPI-enabled credit cards.
"The convenience and widespread acceptance of UPI combined with the power of credit is leading to a new wave of financial inclusion," says Mohit Bedi, co-founder and chief business officer, Kiwi.
How do they work?
UPI-enabled credit cards are akin to traditional credit cards but linked to a UPI ID, allowing direct payments via the UPI ecosystem.
Rupay credit cards from HDFC Bank, Myntra-Kotak, Yes Bank, Paisabazaar, IndusInd Bank, etc. support this feature.
Cardholders can link their Rupay credit cards to UPI apps such as BHIM, PhonePe, Google Pay, Paytm, and Amazon Pay.
"A UPI-enabled Rupay credit card lets you make UPI payments billed to your credit card instead of your bank account, combining credit card benefits like reward points with UPI's wide acceptance," says Adhil Shetty, CEO, BankBazaar.com.
Users can request a Rupay credit card as an additional or add-on card alongside their existing Visa or Mastercard.
"While your overall credit limit would remain unchanged, you can link the Rupay card to your UPI account for enhanced utility," says Shetty.
They can also change the network on their existing card to Rupay.
The Reserve Bank of India permitted UPI integration with the National Payments Corporation of India's (NPCI) Rupay credit cards in June 2022.
"Unlike traditional credit cards, UPI-enabled credit cards offer access to UPI's vast network of 320 million merchant touchpoints, well beyond the 9 million point-of-sale (POS) terminals used by traditional credit cards," says Bedi.
Greater access, overspending risk
UPI-enabled credit cards allow payments via mobile apps without requiring a physical card.
"It also enables one to use their credit card for purchases at local shops and kirana stores that usually do not have POS machines," says Rohit Chhibbar, chief business officer, credit cards, Paisabazaar.
But these cards can at times lead to overspending.
"If you are not prudent, you may exceed your budget, and if it happens too often, you may end up in debt," says Shetty.
Choosing the right card
Many UPI-enabled credit cards offer reward points for transactions.
"Evaluate the rewards structure to ensure it aligns with your spending habits and preferences," says Bedi. He also suggests checking annual fees and evaluating the quality of customer support.
An Indian Overseas Bank source suggests ensuring that card's UPI integration is smooth, ensuring seamless transactions. Watch out for restrictions, such as caps on rewards beyond a certain limit.
"A minimum transaction value may be needed to earn rewards. Also, exclusions or restrictions on certain UPI transactions could impact the card's value," says Chhibbar.
Precautions to take
The Kiwi report indicates that young users are the primary adopters, with 45 per cent under 30, 30 per cent aged 31 to 40, and 20 per cent aged 41 to 50.
Chhibbar suggests that consumers track their outstanding balance regularly, as frequent small transactions can add up quickly.
Security-related precautions for UPI-enabled credit cards are similar to those for standard UPI payments.
"Set a secure UPI PIN, download the app from official sources (like Google Play Store or Apple App Store), and avoid public Wi-Fi for transactions," says Bedi.
Disclaimer: This article is meant for information purposes only. This article and information do not constitute a distribution, an endorsement, an investment advice, an offer to buy or sell or the solicitation of an offer to buy or sell any securities/schemes or any other financial products/investment products mentioned in this article to influence the opinion or behaviour of the investors/recipients.
Any use of the information/any investment and investment related decisions of the investors/recipients are at their sole discretion and risk. Any advice herein is made on a general basis and does not take into account the specific investment objectives of the specific person or group of persons. Opinions expressed herein are subject to change without notice.
Feature Presentation: Ashish Narsale/Rediff.com
