With the rising popularity of UPI payments in India, many banks and fintech companies have now enabled UPI credit card transactions. This is a revolutionary step because it combines the ease of UPI with the financial flexibility of credit cards. However, like every financial product, there are certain charges and hidden fees that users should be aware of before swiping or scanning their credit card through UPI.
In this guide, we’ll break down UPI credit card charges, how they work, common hidden fees, and practical tips to avoid unnecessary costs.
Understanding the Basics of UPI Credit Cards
A UPI credit card allows users to link their credit card directly with their UPI apps (like PhonePe, Paytm, Google Pay, BHIM, etc.). Instead of using a bank account for UPI transactions, you can now make payments directly through your credit card.
- Example: You can scan a QR code at a shop and choose your credit card (via UPI) as the payment option.
- Benefit: You earn reward points, enjoy the credit period (usually 30–45 days), and don’t need to carry physical cards.
Currently, RuPay credit cards are widely accepted on UPI because of NPCI’s partnership with banks.
Why UPI Credit Card is Gaining Popularity?
- Ease of Payments – No need to swipe the card, just scan and pay.
- Reward Points – Earn cashback, discounts, or loyalty points on transactions.
- Wider Acceptance – Small merchants who only use UPI QR codes can now accept credit card payments indirectly.
- Secure Transactions – UPI is backed by two-factor authentication, making it safe.
But while benefits look attractive, charges and hidden fees are the real game-changers you must understand.
UPI Credit Card Charges: What You Need to Know
1. Annual or Joining Fee
- Some banks issue UPI-enabled credit cards for free, while others charge an annual fee (₹499–₹3000 depending on the card).
- Always check whether your RuPay credit card has a waiver option (like free if you spend ₹1 lakh in a year).
Hidden Fee Alert: Even if UPI is free, the credit card itself may not be free.
2. Merchant Discount Rate (MDR)
- MDR is a small percentage fee charged to merchants for accepting card payments.
- On UPI using RuPay credit card, NPCI has capped MDR at very minimal levels, usually 0.5%–2% depending on the merchant category.
Impact on Users: Most merchants won’t charge customers directly, but in some cases (like online payments), you may see a convenience fee passed on to you.
3. Cash Advance Charges
- If you withdraw cash using your UPI credit card, banks apply cash advance charges (2.5%–3.5% of the amount, minimum ₹500).
- Plus, interest starts immediately (no interest-free period).
Pro Tip: Never use your UPI credit card for withdrawing cash unless it’s an emergency.
4. Interest Charges on UPI Credit Card
- Just like regular credit cards, if you don’t pay your full bill on time, interest (APR) applies.
- Typical interest rate: 30%–42% annually (2.5%–3.5% per month).
- UPI payments feel like small spends, but they add up quickly if not repaid.
5. Late Payment Fee
- If you delay your UPI credit card bill, you’ll be charged late fees.
- Common range: ₹200 to ₹1000 depending on outstanding amount.
Hidden Trap: Even a ₹100 missed payment can attract penalties + GST.
6. Over-Limit Charges
- If you spend beyond your card’s approved limit, banks may allow the transaction but charge 2%–3% of the exceeded amount.
Example: Limit = ₹50,000; You spend ₹52,000 → Over-limit fee could be ₹400–₹600.
7. GST on Charges
- All charges (interest, late fee, MDR, cash advance) attract 18% GST.
- This makes even small penalties more expensive.
8. International Transactions via UPI Credit Card
- Currently, UPI is expanding globally (like in Singapore, UAE, Mauritius).
- If you use your RuPay credit card via UPI abroad, expect forex markup fees (1.5%–3.5% of the transaction).
Hidden Fees Many Users Ignore
- SMS Alert Charges – Some banks charge ₹10–₹15 per month for SMS alerts.
- Card Replacement Fee – If lost, replacement may cost ₹200–₹500.
- Reward Redemption Fee – Banks sometimes charge ₹99 per redemption request.
- Inactivity Penalty – Rare, but some banks revoke benefits if you don’t use the card enough.
How to Avoid High UPI Credit Card Charges?
- Pay Full Bill on Time – Avoid interest and late fees.
- Check for Annual Fee Waivers – Use the card enough to skip annual charges.
- Use for Planned Expenses Only – Don’t treat it as free money.
- Track Small UPI Payments – Even a ₹50 chai bill adds to your credit statement.
- Avoid Cash Withdrawals – Use debit card or UPI bank account for cash.
- Read Your Card’s Terms & Conditions – Every bank has slightly different charges.
Conclusion
The UPI credit card is a game-changer for Indian payments, blending the simplicity of UPI with the benefits of credit cards. However, many users are unaware of the hidden fees and charges that come with it.
- If used wisely: You can enjoy reward points, cashback, and a smooth payment experience.
- If ignored: You may fall into a trap of late fees, interest, and mounting debt.
Always remember: UPI is instant, but credit card repayment is not. Treat your UPI credit card like real money, and it will serve as a powerful financial tool instead of a financial burden.