Soon, you can apply for EMI facility, pay credit card bills and increase limits on RuPay credit cards with UPI

NPCI announced three new features for UPI-linked RuPay credit cards. These features will be rolled out from May 31, 2024.

RuPay credit card users who have linked their cards to the Unified Payments Interface (UPI) will soon be able to access wider benefits.

Earlier this week, the National Payments Corporation of India (NPCI) announced three new features for UPI-linked RuPay credit cards. They include applying for an equated monthly instalment (EMI) facility through such credit cards, setting up UPI AutoPay to pay outstanding credit card bills or credit line instalments using UPI applications, and enhancing the RuPay cards’ credit limits. These features will be rolled out from May 31.

“Availability of such features through UPI makes it convenient for users. UPI applications are far more frequently used than bank applications for UPI payments,” says Parijat Garg, a digital lending consultant.

RuPay credit card users can link the card to Amazon Pay, BHIM, CRED, Google Pay, Paytm and PhonePe UPI apps. “These new initiatives will push the preference for RuPay credit cards even further,” adds Ankur Mittal, co-founder of Card Insider, a platform that tracks the credit card business.

Let’s take a closer look at each of these new features and how they work.

Applying for EMIs

RuPay credit card holders will be able to convert their purchases into EMI-based repayment plans through UPI apps. For instance, suppose you had swiped a RuPay credit card (linked to UPI) to shop for Rs 10,000 on May 15. Instead of paying this amount up front, you can choose to repay it in instalments. You can do so after May 31 by accessing the transaction history of the UPI application and making the request for EMI conversion.

From May 31 onwards, you can also convert purchases into EMIs right at the time of executing the transaction.

“Adoption will also be much better if a consumer can choose the EMI option within the UPI application itself while making the purchase rather than having to go to a bank application separately at a later point to convert the purchase into an EMI,” says Garg.

The UPI applications will ask for user consent via the pin to convert the purchases into EMI, on acceptance of relevant terms and conditions.

It will display all the existing EMIs in a particular section. Since the EMI will be termed as a loan, you will not be allowed to modify or delete the EMI from the section, except in the case of foreclosure.

Pay outstanding credit card bills and credit line instalments

Let’s first understand what a credit line on UPI is. To access the credit line on UPI service, users have to submit a formal application to their bank. The bank will review the application and documents (income statements, identity proof, address proof, and other relevant paperwork) submitted. If the application is approved, the bank will notify the applicant of the approved credit limit, and its terms.

“Once the bank approves the predetermined borrowing limit, which is similar to the credit limit of a credit card, one can utilise it as one wants,” says Virat Diwanji, group president and head, consumer banking, Kotak Mahindra Bank. He adds that repayment, along with the applicable interest, can be settled at a later date, akin to how credit card payments work.

Now, RuPay credit card users will be able to pay their credit card bills and credit line instalments from for self and family members using UPI applications. They can even set up UPI AutoPay and clear their outstanding credit dues easily.

To do this, a payment service provider will create a UPI ID to receive the credit card bill and credit line instalment payments. A payment service provider acts as an intermediary between users and their respective banks. Then UPI application will provide details of the minimum amount due, total amount due, bill due date, etc. on linked credit card outstanding bills and credit line instalments.

“Paying outstanding bills with the autopay feature on a UPI application will only lead to better management of credit cards and financial responsibility,” says Mittal.

“The issuer bank will clear their dues in real-time upon receiving the payments and make the credit balance available to the user for usage,” NPCI said in the release.

Also read | Making UPI payments via RuPay credit cards: Is it worth it?

Enhancing the credit limit

Users will be able to apply for an enhanced credit limit on their RuPay credit card from the issuing entity through the UPI application. This would allow credit card holders to request limit increases in times of large purchases, emergencies, festivals, family events or according to their requirements.

This functionality will enable changes to credit limits through UPI applications, which could be generic or for a specific period, by obtaining user consent through the pin.

“The benefit of this feature would be that banks can offer lower limits to new-to-credit (NTC) card applicants and then increase them if asked based on spending patterns,” says Mittal.

Also read | Linking RuPay credit cards to UPI: Why it helps, and where it doesn’t

Card users need to be cautious  

Credit card users can now apply for EMIs through UPI applications. It’s important to understand that with every purchase converted to EMI you will have to pay interest. Banks nowadays enable customers to easily convert transactions that involve lumpsum payments into EMI-based purchases, thereby earning more interest.

“But customers must be careful, as this can lead to overspending,” says Sumanta Mandal, founder of TechnoFino, a platform that reviews debit and credit cards. Millennials and GenZ tend to purchase expensive items such as iPhones, laptops, and other electronic gadgets by opting for EMI-based payments (essentially by taking a loan), which can backfire later.

Then, easy access of a credit limit management feature may allow UPI applications/providers to push for enhancements at much shorter intervals. Though this can  be handy for a consumer who genuinely needs it, one should not enhance the limit frequently.

“It’s because every enhancement may come with a credit score check at the back end (meaning a potential small drop in the credit score),” says Garg. He adds that increased limits may allow consumers to keep spending more. However, the repayment of every spend is still an obligation that the consumer needs to plan for.