The Reserve Bank of India has recently allowed the linking of credit cards to UPI platforms. The procedure will begin with RuPay credit cards. Currently, only savings and current accounts can be linked to UPI platforms to allow transactions. This move offers more convenience to the users as they can use their mobile phone to make a payment while availing the benefits of a credit card.
How does it help the consumers?
Though many users already own credit cards and debit cards, paying with cards requires the users to carry the card everywhere, swipe, and sometimes authenticate with OTP. On the other hand, UPI offers the convenience to make payments using your mobile phone which most consumers have with them at all times. They just need to scan the code or enter the mobile number of the recipient in order to make a transaction.
Once this new option is available, it will open up more avenues for consumers to carry out transactions with ease. Currently, as only savings or current accounts can be linked to UPI, users only have limited ways to pay. The inability to use credit cards for transactions was a major disadvantage of the UPI platforms and the same is being addressed now.
It will encourage users to continue using UPI even when they do not wish to use their savings/current account for a transaction; they can use their credit cards for UPI transactions and, at the same time, avail the short-term credit facility offered by credit cards.
|In the month of May 2022 alone, 594.63 Crore UPI transactions were made in India which amount to Rs. 10.40 Lakh Crore. So much is the extent and popularity of UPI in the country.|
What are the risks?
While credit cards linked to UPI will surely offer more convenience to the users, it can also lead to overspending. This can lead to increased credit card bills and if not paid on time, hefty finance charges could be levied. Once cardholders start using this facility, they need to keep track of the transactions they put on their credit cards and only spend as much as they can afford to pay back on time.
Talking about this major development, an RBI official said, “This arrangement is expected to provide more avenues and convenience to the customers in making payments through the UPI platform. This facility would be available after the required system development is complete.”
Initially, only RuPay credit cards will be linked to UPI. Issuers that offer certain credit cards on the RuPay network include PNB, Bank of Baroda, SBI Card, HDFC Bank and IDBI Bank.