Credit cards can now be linked with UPI; Here’s how it works

After the news about the hike of repo rates by RBI, the governor Shaktikanta Das allowed the linking of credit cards on the UPI platform and it is good news for the credit card users. The RBI governor said, at the first phase, Rupay credit cards will be linked to the UPI and he also proposed to extend the move to all credit cards, Money Control reported.

At present, the UPI facilitates transactions by linking savings and current accounts through debit cards. Users will soon be able to do UPI transactions by linking it with their Rupay Credit Cards. “The decision to make the Rupay credit card linking to UPI will be a key regulatory measure which is likely to benefit most credit card holders in the future,” said Governor Shakthikanta Das. 

“UPI has become the most inclusive mode of payment in India with over 26 crore unique users and 5 crore merchants on the platform. In May 2022 alone, about 594 crore transactions amounting to Rs 10.4 lakh crore were processed through UP. It is now proposed to allow linking of credit cards on the UPI platform,” Shaktikanta Das added. 

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At first, the Rupay credit cards will be enabled with this facility. This facility would be available after the required system development is complete. Necessary instructions will be issued to NPCI separately. 

However, it is not yet clear how the Merchant Discount Rate will apply to UPI transactions made using credit cards. For each transaction, the merchant pays a fixed percentage of the transaction amount, which is divided between the banks and the payment service providers. Anyways,  clarity will be needed on whether MDR will have to be let go for transactions done using credit cards linked to UPI.