Earning Rewards on UPI Transactions: A Comprehensive Guide to UPI Credit Cards
Following the Reserve Bank of India’s (RBI) 2022 move, RuPay credit cards can now be linked to the Unified Payments Interface (UPI), allowing users to earn rewards on daily transactions. This article breaks down how to effectively use credit cards for UPI transactions and lists the most rewarding cards in this category, including their benefits, limitations, and expert opinions.
The ability to link RuPay credit cards to UPI and earn rewards on daily transactions has opened up new avenues for consumers to maximize their benefits from credit card usage. Since the RBI’s move in 2022, major banks have introduced RuPay variants of their credit cards, including versions of their Visa or MasterCard cards, which can be used for UPI payments. Some have even launched exclusive UPI credit cards offering 1.5–5% cashback. This development is especially beneficial for users in tier-II and smaller cities, where many small merchants do not have POS machines but most accept UPI.
All About UPI Credit Cards
A UPI credit card allows users to pay merchants via UPI using their credit card instead of a bank account. However, these payments are restricted to customer-to-merchant (C2M) transactions only, not peer-to-peer (P2P) transfers. This limitation prevents users from misusing credit by revolving credit and sending funds to the bank accounts of friends or family. UPI credit cards are particularly helpful in scenarios where small merchants do not have POS machines but accept UPI payments, making them a convenient option for daily transactions.
How UPI Credit Cards Work
When attempting to pay a UPI ID or scan a QR code linked to a personal account rather than a merchant, the credit card option will not appear. This means users can earn rewards while paying a grocery store or an auto driver through their business UPI QR using their credit card, but they cannot use this method to send rent to their landlord. The process is designed to facilitate transactions with merchants, excluding personal transfers.
Why Aren’t All Merchants Accepting It Yet?
Despite the strong start of UPI payments via credit cards, some merchants have pulled back due to the merchant discount rate (MDR)—a fee businesses must pay to banks or card networks for processing such payments. Regular UPI transactions don’t carry this charge, but credit card-based UPI payments do. According to Sumanta Mandal, founder of TechnoFino, a digital platform, "Almost all payment gateways charge a normal card’s MDR if the payment amount exceeds ₹2,000 per transaction. Shops like medical stores and local grocery stores, where the bill can be more than ₹2,000, are disabling the RuPay UPI option to avoid MDR charges." However, daily UPI payments are generally under ₹2,000 per transaction, which minimizes the impact of MDR for most small merchants.
Can I Use My Existing Cards?
Customers with credit cards from networks like MasterCard or Visa who want to make UPI payments through their credit cards can request their bank to issue a virtual RuPay variant of the same card for that purpose. While it’s a separate card, the credit limit is part of the overall limit of the primary card. In the past year, some banks have launched credit cards exclusively designed to reward UPI spending, such as HDFC Tata Neu, Yes Bank Klick, Axis Bank Supermoney, and Jupiter Edge CSB.
Top Rewarding UPI Credit Cards
- Axis Supermoney Card: Offers a flat 3% cashback on all scan and pay UPI payments done on the Supermoney app, with a maximum monthly cashback capped at ₹500.
- Yes Bank Klick Card: Rewards on scan and pay UPI payments made through the Kiwi app, with a base reward rate of 1.5% that increases to 2% with Kiwi Neon membership.
- HDFC Tata Neu Card: Offers 1.5% value back when used on partner UPI apps, though the app has been noted to be slow.
According to Kashif Ansari, an assistant professor of finance at OP Jindal University and a credit card expert, "Axis Supermoney and Kiwi are far superior now" in terms of reward rates, with the Axis Supermoney card and Yes Bank Klick card currently offering the best reward rates up to 3% and 5%, respectively.
Key Highlights and Considerations
- Exclusions: Several spending categories are excluded from earning rewards on these cards, including utilities, insurance, jewellery, financial institutions, educational institutions, government services, and retail outlets.
- Minimum Payment Requirements: Some cards, like the Yes Bank Klick, require a minimum payment of ₹100 to earn rewards.
- Caps on Cashback: Cards like the Axis Supermoney have a monthly cap on cashback, which can limit the total rewards earned.
- Usage on Partner Apps: Cards like the HDFC Tata Neu and Yes Bank Klick offer higher rewards when used on specific partner UPI apps.
Conclusion
UPI credit cards present a new and rewarding way for consumers to make daily transactions, especially beneficial in tier-II and smaller cities where UPI acceptance is common among small merchants. By understanding how these cards work, their benefits, and their limitations, consumers can make informed decisions to maximize their rewards. As the landscape of digital payments continues to evolve, it’s essential for both merchants and consumers to be aware of the opportunities and challenges presented by UPI credit cards.
Keywords: UPI Credit Cards, RuPay, Unified Payments Interface, Credit Card Rewards, Digital Payments, Merchant Discount Rate, UPI Transactions, Credit Card Usage, Consumer Benefits, Digital Wallets, Payment Gateways.
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