UPI joined hands with Credit Cards. But should you?

​Linking of credit cards to Unified Payments Interface (UPI) is expected to drive credit penetration into digital payments. In the initial stage, RBI is planning to link Rupay credit cards to the UPI system which has become the most inclusive mode of payment in the country. UPI has emerged as a greater transaction medium and fintech platforms are expected to benefit from this development. With that, the linking of credit cards to UPI is expected to be a win-win for full-stack payments and financial solutions provider Paytm.

​This could be a boost for credit penetration into digital payments which has been declining owing to the popularity of UPI and could potentially pave the way for improved monetization of mobile/UPI payments for payment cos.

​While merchant adoption will need to be watched, this move (when extended beyond Rupay) can sharply improve the acceptance network for credit cards (both virtual and physical) given UPI-QR code penetration (50%) vs PoS device penetration (<5%).

​Currently, UPI transactions are carried out by linking Savings and Current Accounts through the Debit Cards of users.

​My take?

​Do not connect your UPI to your credit card for personal spendings.

The idea of your credit card linked to your UPI looks very fascinating.
Credit card companies and UPI platforms are going to come with a lot of discounts and offers. You will feel as if you are saving a lot of money by using this mode of payment.

But what you are missing is that you will be saving only on the increased spendings that you do via your credit card.

It will open up more avenues where you can pay via credit card which will result in you spending more in form of credit than the money that you actually have.

It simply means more liability.

It is not free money.
It is your money.
And whatever extra you spend is going to get deducted from your savings.

​Cheers!

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