How Does a UPI Credit Card Work, and Is It Better Than Regular Credit Cards?

For decades, using a credit card meant carrying a plastic rectangle in your wallet, handing it to a waiter, or dipping it into a machine. But the landscape of Indian finance has changed.

The Reserve Bank of India (RBI) and NPCI introduced a revolutionary feature: Linking Credit Cards to UPI.

Now, you don’t need to swipe. You just scan. But how exactly does this work? Is it essentially the same as a regular credit card, or is it a superior financial tool?

Here is a breakdown of how UPI credit cards work, specifically using apps like Paytm, and whether you should switch.

How Does a UPI Credit Card Work?

To understand this, you first need to know the limitation of the past: Previously, UPI only worked with your Savings/Current Bank Account (Debit). Credit cards were separate.

Now, you can link a RuPay Credit Card to your UPI app.

The Step-by-Step Mechanism:

1. Linkage: You open your UPI app (like Paytm), go to “Link RuPay Credit Card,” and select your bank. The app fetches the card details linked to your mobile number.
2. No “Add Money” Required: Unlike a wallet where you have to load money, this links directly to your credit limit.
3. The Transaction:
   • You visit a shop and scan their QR code.
   • The app asks: “Pay from?”
   • Instead of your Bank Account, you select your RuPay Credit Card.
   • You enter your UPI PIN.
4. Processing: The money is deducted from your credit card limit, just like a swipe. The merchant receives the funds instantly.

The Key Constraint: RuPay Only

Currently, this feature is primarily exclusive to RuPay network credit cards. Most Visa or Mastercard credit cards cannot yet be linked to UPI for direct scanning (though regulatory changes are in progress).

UPI Credit Card vs. Regular Credit Card: The Showdown

Is the digital version actually better than the plastic one? Let’s compare them on four critical parameters.

1. Acceptance (Winner: UPI Credit Card)

• Regular Card: You can only use it at shops that have a posh “Point of Sale” (POS) swiping machine. Your local sabzi wala or tea stall usually won’t accept it.
• UPI Credit Card: It works anywhere there is a QR code. From a roadside coconut water vendor to a mall outlet, if they accept UPI, they can technically accept your credit card payment. This massively expands where you can use your credit limit.

2. Convenience (Winner: UPI Credit Card)

• Regular Card: You must carry the physical card. If you forget your wallet, you are stuck.
• UPI Credit Card: Your card lives in your phone. As long as you have your mobile, you have your credit line.

3. P2P Transfers (Winner: Neither)

• Regular Card: You cannot transfer money to a friend’s bank account using a credit card (unless you pay heavy charges on rent-payment apps).
• UPI Credit Card: Crucial Note: You cannot use a UPI Credit Card to send money to friends, family, or personal mobile numbers. It is strictly for P2M (Person to Merchant) transactions. If you scan a friend’s personal QR code, the option to pay via Credit Card will simply disappear.

4. Security (Winner: UPI Credit Card)

• Regular Card: Risk of “skimming” (thieves copying your card data at a restaurant) or someone seeing your CVV.
• UPI Credit Card: You never hand over your phone. The merchant never sees your card number or CVV. You authorize everything with a PIN on your own screen.

Is It Better? The Verdict

Yes, it is better for daily usage, but it doesn’t replace the plastic card entirely.

• It is better for: Small, daily expenses (groceries, pharmacy, snacks) where you want to earn reward points but the merchant doesn’t have a card machine.
• It is not for: International travel (most UPI cards don’t work abroad easily yet) or withdrawing cash (ATM withdrawals on credit cards attract huge fees).

The Recommendation:
If you already have a RuPay Credit Card, link it to Paytm immediately. It turns your “emergency” credit line into a “daily convenience” tool.