UPI Credit Cards have quickly become one of the most convenient ways to make digital payments in India. They combine the flexibility of credit cards with the ease of the Unified Payments Interface (UPI). With a UPI credit card, you can scan QR codes, pay online, or shop offline—without needing to swipe your card.
However, like every financial product, UPI credit cards also come with certain costs that are not always obvious. Many first-time users only look at the reward points or cashback offers but overlook the hidden charges that can impact their overall expenses. Understanding these charges is essential if you want to manage your credit card wisely and avoid unnecessary financial stress.
In this article, we’ll break down the hidden charges of UPI credit cards, explain how they work, and share tips to use them smartly.
Introduction to Credit Cards on UPI
A UPI Credit Card is simply a regular credit card that has been linked with your UPI app (such as Google Pay, PhonePe, Paytm, or BHIM). This allows you to make transactions directly through UPI, without swiping or entering your card details each time.
For example, instead of using your debit card for UPI payments, you can link your credit card and enjoy benefits like reward points, cashback, and credit flexibility. While this feature sounds attractive, it also means your spending power increases—which can result in higher bills and potential hidden charges.
Why Do Hidden Charges Matter?
Hidden charges often catch cardholders by surprise because they are not clearly explained at the time of sign-up. These charges may not appear in bold on the bank’s marketing materials, but they show up in your monthly statement. If ignored, they can eat into the rewards you earn and even lead to long-term debt.
Common Hidden Charges in UPI Credit Cards
1. Annual Maintenance Fees
Most UPI credit cards come with an annual fee or renewal charge. While some banks advertise “lifetime free” cards, many include conditions like minimum spending requirements to waive the fee. If you don’t meet those conditions, you’ll end up paying the annual fee, which can range from ₹500 to ₹5,000 depending on the card.
Tip: Always check the terms and conditions to know if your card is truly free for life.
2. Cash Withdrawal Charges
UPI credit cards allow cash withdrawal from ATMs, but this is a costly mistake. Banks charge a cash advance fee (typically 2–3% of the withdrawn amount) along with interest charges that start accumulating from day one—no interest-free period applies.
Example: If you withdraw ₹10,000, you may end up paying ₹300 as fees plus high daily interest.
3. Late Payment Penalties
If you miss paying your monthly bill by the due date, the bank will charge a late payment fee. This can range from ₹200 to ₹1,200 depending on the outstanding balance. On top of that, you’ll also have to pay interest on the pending amount, often 30–40% annually.
Tip: Always set up auto-pay or reminders to avoid this unnecessary cost.
4. Over-Limit Charges
Many users don’t realize that spending beyond the approved credit limit triggers over-limit fees. This is usually a percentage of the excess amount, often around 2–3%. While your transaction may still go through, you’ll pay extra for exceeding your limit.
5. Foreign Transaction Fees
If you use your UPI credit card abroad or for international online payments, you may be charged foreign currency markup fees (usually 2–3.5% of the transaction value). This is often overlooked, but it adds up if you shop frequently on international websites.
6. GST on Fees and Charges
Every fee on your UPI credit card—whether it’s annual, late payment, or cash withdrawal—comes with an additional 18% GST. For example, if your late fee is ₹500, you’ll actually pay ₹590 after GST.
7. EMI Conversion Charges
Many users convert their purchases into EMIs using UPI credit cards. While it feels lighter on the pocket, banks charge processing fees and interest rates on EMIs. Over time, you may end up paying more than the actual product price.
8. Reward Redemption Fees
Yes, even rewards can come with hidden charges. Some banks charge a redemption fee (₹50–₹100) each time you use your points for vouchers or purchases. While the amount seems small, it reduces the actual value of the rewards.
How to Avoid Hidden Charges on UPI Credit Cards?
- Read the Fine Print: Before applying, always go through the card’s terms and conditions.
- Pay Bills on Time: Avoid late payment fees and interest by paying the full balance before the due date.
- Track Your Spending: UPI makes it easy to overspend since payments are just a tap away. Set a budget.
- Use EMI Wisely: Only convert to EMI if necessary, and compare the final cost with upfront payment.
- Check for Waivers: Many banks waive annual fees if you spend a minimum amount. Plan your usage accordingly.
- Avoid Cash Withdrawals: Use UPI credit cards only for purchases, not cash.
- Redeem Rewards Smartly: Save points until you can redeem them for higher-value items.
Are UPI Credit Cards Still Worth It?
Yes, absolutely. UPI credit cards are highly convenient and rewarding if used wisely. They offer:
- Seamless payments via UPI
- Rewards and cashback on everyday purchases
- Security and flexibility compared to debit cards
But the key is responsible usage. If you are aware of hidden charges and avoid common mistakes, a UPI credit card can be a powerful tool for managing your finances.
Conclusion
UPI credit cards represent the future of digital payments in India, blending the benefits of UPI with the financial flexibility of credit cards. But while they are convenient, users must stay informed about the hidden charges that can quietly drain money.
By reading your statements carefully, paying on time, and avoiding unnecessary fees, you can make the most of your UPI credit card while keeping your finances healthy.