UPI-Linked Credit Cards in 2025: Are They Worth It?
Introduction
The financial landscape in India has undergone a massive transformation over the past decade, with digital payments leading the charge. The Unified Payments Interface (UPI), introduced in 2016, revolutionized peer-to-peer and merchant transactions, making cashless payments seamless. In recent years, another innovation has emerged—UPI-linked credit cards, which combine the convenience of UPI with the benefits of credit.
As we step into 2025, the adoption of UPI-linked credit cards has surged, but the big question remains: Are they truly worth it?
In this comprehensive blog, we’ll explore:
What Are UPI-Linked Credit Cards?
How Do UPI-Linked Credit Cards Work?
Benefits of UPI-Linked Credit Cards in 2025
Potential Drawbacks & Risks
Comparison with Traditional Credit Cards & Debit UPI
Are They Worth It? Final Verdict
Let’s dive in!
1. What Are UPI-Linked Credit Cards?
UPI-linked credit cards allow users to make payments via UPI apps (like PhonePe, Google Pay, Paytm, and BHIM) while charging the transaction to their credit card instead of a bank account.
Before this innovation, UPI transactions were limited to:
Bank account-linked UPI (Debit UPI) – Direct deductions from savings/current accounts.
Prepaid wallets & PPI cards – Limited spending capacity.
Now, with RBI’s approval, major banks and card networks (Visa, Mastercard, RuPay) have enabled credit card linking to UPI, giving users more flexibility.
Key Players in 2025
Banks: HDFC, SBI, ICICI, Axis, Kotak, etc.
Card Networks: RuPay (dominant due to NPCI integration), Visa, Mastercard.
UPI Apps: PhonePe, Google Pay, BHIM, Paytm, Amazon Pay.
2. How Do UPI-Linked Credit Cards Work?
Linking a credit card to UPI is simple:
Open your UPI app (e.g., Google Pay).
Go to "Payment Methods" and select "Add Credit Card."
Enter card details (number, expiry, CVV).
Set UPI PIN (may require OTP verification).
Start transacting via UPI using credit.
Where Can You Use UPI-Linked Credit Cards?
Merchant QR codes (both online & offline).
Peer-to-peer (P2P) payments (some restrictions apply).
Bill payments, recharges, subscriptions.
E-commerce checkouts (via UPI option).
3. Benefits of UPI-Linked Credit Cards in 2025
✅ 1. Wider Acceptance Than Traditional Credit Cards
Many small merchants accept UPI QR codes but not card machines.
Now, credit card users can pay even at street vendors without carrying physical cards.
✅ 2. Earn Reward Points & Cashback
Most credit cards offer 1%–5% rewards on spends.
UPI-linked transactions also qualify for rewards (depends on bank policy).
Example: HDFC Millennia Credit Card gives 5% cashback on UPI spends.
✅ 3. No More Physical Card Swiping
Contactless payments reduce fraud risks.
No need to carry multiple cards—just scan & pay via UPI.
✅ 4. Interest-Free Credit Period (Up to 50 Days)
Like traditional credit cards, UPI-linked cards offer a grace period.
Helps in cash flow management without immediate bank deductions.
✅ 5. EMI & BNPL Options on UPI
Some banks allow converting UPI credit transactions into EMIs.
Buy Now, Pay Later (BNPL) options available via apps like Lazypay, Simpl.
✅ 6. Better Tracking & Budgeting
All transactions reflect in one UPI app, unlike multiple card statements.
Apps like CRED integrate seamlessly for bill tracking.
4. Potential Drawbacks & Risks
❌ 1. Merchant Discount Rate (MDR) Charges
Unlike debit UPI (zero MDR), credit UPI may have fees (0.5%–1%).
Some banks pass this cost to users, reducing rewards’ value.
❌ 2. Not All Banks Support It Yet
Smaller banks & co-operative banks may not offer UPI credit linking.
RuPay cards have better integration than Visa/Mastercard.
❌ 3. Risk of Overspending
Easy UPI access can lead to impulse spending.
Unlike debit UPI (direct bank deduction), credit bills pile up.
❌ 4. Reward Exclusions
Some banks exclude UPI spends from reward points.
Example: Axis Magnus doesn’t give reward points on UPI transactions.
❌ 5. Security Concerns
Phishing scams via fake UPI payment requests.
If UPI app is hacked, credit card could be misused.
5. Comparison: UPI-Linked Credit Cards vs. Traditional Credit Cards vs. Debit UPI
| Feature | UPI-Linked Credit Card | Traditional Credit Card | Debit UPI |
|---|---|---|---|
| Payment Mode | Scan & Pay via UPI | Swipe/Tap/Online | Scan & Pay via UPI |
| Credit Period | Up to 50 days | Up to 50 days | Instant deduction |
| Rewards | Yes (varies by bank) | Yes | Rarely |
| Interest Charges | If unpaid | If unpaid | None |
| Acceptance | Any UPI merchant | Card terminals required | Any UPI merchant |
| MDR Charges | Possible (0.5%-1%) | 1%-3% (on merchants) | Zero |
| EMI Option | Yes | Yes | No |
Which One Wins?
For rewards & credit flexibility → UPI-linked credit card.
For zero fees & strict budgeting → Debit UPI.
For international spends & premium perks → Traditional credit card.
6. Are UPI-Linked Credit Cards Worth It in 2025? Final Verdict
👍 YES, If You…
Frequently use UPI for daily spends.
Want reward points on small merchants.
Prefer contactless payments over card swiping.
Manage credit responsibly & pay bills on time.
👎 NO, If You…
Rarely use UPI (stick to traditional cards).
Are prone to overspending on credit.
Your bank excludes UPI from rewards.
Final Recommendation
UPI-linked credit cards are a game-changer for digital-savvy users who want the best of both worlds—UPI convenience + credit benefits. However, they may not replace traditional cards entirely, especially for premium travel perks, lounge access, and international transactions.
If your bank offers good rewards on UPI spends and you’re disciplined with repayments, linking your credit card to UPI is absolutely worth it in 2025!
Conclusion
The fusion of UPI and credit cards marks a new era in digital payments. With increasing adoption, better rewards, and seamless transactions, UPI-linked credit cards are here to stay. However, users must weigh the costs, rewards, and risks before jumping in.
What’s your take? Have you tried UPI-linked credit cards? Share your experience in the comments!
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