UPI Credit Cards: The Biggest Revolution in India’s Digital Payments

There was a time when shopping meant carrying a lot of cash and standing in long queues at ATMs on weekends. Then came debit cards, mobile wallets, and finally, the watershed moment-UPI. India’s Unified Payments Interface has already transformed how millions transact daily, from a small tea stall owner in Delhi to a startup founder in Bengaluru. But that’s not all. The next wave of India’s digital payment revolution has just begun, with the emergence of UPI credit cards.

The new UPI credit cards not only bring together the convenience of UPI and the benefits of credit, but are also raising the bar in convenience, safety and accessibility! For consumers, this means more flexibility; for merchants, it means faster settlements and yet another significant step toward a cashless economy for the country.

The Digital Payments Evolution in India

No one could have predicted the unprecedented trajectory that Unified Payments Interface (UPI) would take when it was launched in 2016, not even the most optimistic of them. India reached pole position in real-time digital transactions in a couple of years, leaving entire continents behind. The magic lay in its simplicity-instant money transfer using just a mobile number or a virtual payment address.

The UPI has made multiple bank accounts manageable through one mobile application and enabled instant peer-to-peer or merchant payments without sharing sensitive bank details. The advent of the QR code has expedited adoption, removing the barrier of digital payment from the upper echelons of society to the far reaches and most remote areas of India.

Yet, for all its success, one piece of the puzzle was missing: credit.

While credit cards existed, they catered to a small urban segment. According to RBI data, India has more than 36 crore credit cards and debit cards combined as of 2024, but only about 10 crore are credit cards, thus covering a fraction of the population. This gap between digital payment users and credit users set up the path for the next evolution: UPI credit cards.

What Exactly Are UPI Credit Cards?

In simple words, a UPI credit card lets you link your credit card directly to any UPI application, such as Google Pay, PhonePe, Paytm, or BHIM. You do not pay directly from your bank account but instead pay via your credit line, just as you would for a regular swipe or tap at the PoS machine.

Imagine buying groceries on credit via your UPI app or paying cab fares with your credit card balance using a QR code. That’s the power of UPI credit cards: fusing flexibility in credit with the ubiquity of QR-based payments.

The National Payments Corporation of India made it possible by allowing linkage of RuPay credit cards to the UPI network in 2022. Since then, major players like HDFC Bank, Axis Bank, SBI, and ICICI Bank have enabled their customers to link their RuPay credit cards to leading UPI apps. Over time, Visa and Mastercard will join this lot.

How UPI Credit Cards Work

As that sounds, the process is intuitive:

1. Open your preferred UPI app.
2. Go to the “Add Payment Method” section.
3. Select “Credit Card” and attach your RuPay credit card.
4. Authenticate with your OTP or app PIN.
5. Once you link it, you can pay with it like any bank account or wallet.

Every time you scan a merchant’s QR code, you can choose to pay via your credit card balance. The bank then settles the payment, and you repay the amount later within your credit card’s billing cycle.

The difference is at the backend, where your transaction now draws from your credit limit instead of your savings or current account. The convenience does not change; only the source of funds does.

A Win-Win for Consumers and Merchants

There are benefits for either side in a transaction using UPI credit cards. Let us look into the big wins that fuel their popularity.

The best of both worlds

UPI was always known for its simplicity, and credit cards offered deferred payments and their rewards. UPI credit cards bundle both. You pay instantly, without entering lengthy card details, and still get cashback, reward points, and interest-free periods

Seamless transactions

There is no need for users to carry cards physically or remember 16-digit numbers. A simple scan of a QR code does the job. This makes the use of payment easy at small shops, food outlets, or petrol pumps, where generally a POS terminal may not exist.

Maximise reward

Credit Card users love their reward points. In the case of UPI credit cards, each small purchase becomes an avenue to earn points, even those transactions that are traditionally based on cash or UPI. This makes the reward ecosystem more inclusive in nature.

Improved access to credit

Traditional credit cards often remained reserved for a select salaried population in urban areas. With digital KYC and UPI integrations, financial institutions can extend small-ticket credit cards or spending limits to semi-urban and rural users, thus widening financial inclusion.

Merchant advantage

For merchants, the use of UPI credit cards refers to an increase in purchase volumes. More customers spend comfortably on credit. Unlike debit payments, which are dependent on available balances, credit cards offer deferred billing for larger baskets that heighten business potential.

How UPI Credit Cards Are Transforming India’s Payment Landscape

But it isn’t all about convenience-the revolution is literally reshaping the broader financial ecosystem.

Expanding credit penetration

Credit card penetration in India is less than 10 per cent as a share of its adult population. UPI credit cards can change that dramatically. In effect, they democratize access to credit by digital onboarding, lower entry barriers, and micro-credit options. For many first-time users, these cards represent their first formal credit instrument.

Boosting Digital Lending and Financial Inclusion

Small-ticket credit linked to UPI transactions opens up new lending models. Fintech startups and banks can co-create dynamic products by aligning spending behaviour with credit scores. A vegetable vendor accepting UPI for payments may thus automatically become eligible for a small business credit card linked to UPI, based on transaction history.

Strengthening the Credit Ecosystem

The processing of credit through UPI will help financial institutions gather a far more granular, digital footprint of the user’s spending. With proper data consent and regulations, this information could also help with better risk modelling and more personalised credit offerings.

Reducing Reliance on Cash

Even today, cash dominates in smaller towns and informal sectors, despite the growth of UPI. UPI credit cards make digital transactions more attractive, just swift but rewarding. Added convenience of paying later strengthens adoption.

The Technological Backbone: NPCI’s Vision

Much of the credit for this innovation goes to the National Payments Corporation of India. After the huge success of UPI and RuPay, NPCI conceptualised an integrated payment ecosystem that bridges credit with real-time transactions.

The RuPay network became the first to make this integration possible. Since RuPay is a domestic scheme for payments, it fits with India’s broader goals of self-reliance and financial sovereignty. In turn, NPCI is careful to ensure that such innovations remain affordable, interoperable, and secure, essential elements for mass adoption.

This could very well trigger far-reaching innovations, from EMI-based UPI credit to contactless virtual lines of credit within the UPI framework, which Indians already know and trust.

Major Players Leading the Charge

Several banks and applications have already started deploying their versions. Among the recent developments are:

• HDFC Bank RuPay Credit Card on UPI: Integrated with PayZapp and PhonePe for QR-based purchases.
• ICICI Bank and Axis Bank: Offering seamless linkage through BHIM and Google Pay.
• SBI Card: Increasing the acceptance of the RuPay credit base across all major UPI applications.
• Fintech Platforms: The likes of Slice, OneCard, and Uni are testing similar models that bring together the convenience of UPI with credit features.

The ecosystem is evolving rapidly, and once Visa and Mastercard approvals for UPI linkage come in, the scale will skyrocket.

Security and Trust: The Cornerstones

The adoption of digital payments largely depends on user trust. Fortunately, UPI credit cards are built on robust security frameworks.

• Two-factor authentication: It involves a secure PIN or biometric confirmation with every UPI transaction.
• No exposure of card numbers: Since payment is made via virtual IDs, no sensitive card information is visible to any merchant.
• Bank-grade encryption: All transactions are encrypted end to end, ensuring data privacy.
• Instant tracking: through real-time notifications for every payment, users can identify suspicious activity instantly.

In fact, UPI credit cards eliminate a lot of traditional card fraud risks that are associated with swiping or storing card details online.

The Economic Impact: A New Financial Flywheel

India’s rapid digital transformation has resulted in GDP growth due to increased efficiency and transparency, and this impact will go much deeper with UPI credit cards.

• Formal credit expansion: When more small users access credit, formal lending channels are reinforced and dependence on informal borrowings decreases.
• More consumer spending: Payment options with instalments promote consumption, increase economic activity, and enhance retail.
• Using data to make better products: Fintech companies can create financial products that are smarter and reach more people by watching how people spend money in real-time.
• How it helps the government: When things are more digital, it’s easier to collect taxes and see what’s happening financially across different businesses. 

It’s like a good cycle: trust, including everyone, and new ideas all help each other as India becomes a leader in the world of financial technology.

What’s tricky:

There are always problems with any change. Even though things are exciting, there are still things to figure out.

• Getting businesses ready: It might take small businesses a bit to get how UPI credit cards work, especially when it comes to handling those extra fees.
• Fees for transactions: Using UPI with bank accounts doesn’t cost anything right now, but credit cards have fees, which might stop small businesses from using them.
• Teaching users: Many people still think of UPI as just a way to send money from bank to bank instantly. It’s very important to teach people how to use credit wisely with UPI.
• Competition and rules: With more companies involved, we need to make sure things are the same for everyone, protect customers, and keep fees fair. New ideas need to be balanced. 

NPCI, the RBI, and the banking world, so people continue to trust the system.

 

What’s next: Easy, smooth, and open to everyone

As the difference between old-fashioned banking and online payments gets smaller, UPI credit cards are right in the middle of it all. There could be even bigger changes soon:

• UPI EMIs: Pay with UPI but split your payments into monthly instalments right in the app.
• UPI Credit without touching: Use your phone to pay with a quick tap by linking your payments to virtual credit.
• Small loans: Gig workers or small business owners can get fast access to money to run their businesses with UPI credit accounts.
• One place for all digital money: Put all your credit, debit, and rewards programs together in one UPI-based digital spot.

These changes could totally change how Indians think about spending, saving, and borrowing—all through one app on their phone.

Why This Matters

UPI credit cards are more than just a cool tech trick; they give people power. A college student can go without cash without worrying about running out of money, a small business can sell more with confidence, and a farmer can get a short loan without having to go to a bank. Basically, they make credit available to everyone: not just a few, but anyone with a smartphone who wants to try new technology. They work for everyday life and are key to a country whose financial future is connected to going digital.