Ever since Unified Payments Interface (UPI) began in 2016, the financial sector in India has gone through many changes. Digital payments have been made easier, quicker, and cheaper by the changes UPI brought to the market. As a result, questions about the future of credit cards, which used to be the main type of digital payment, have appeared.
In this article, we study the influence of UPI on the economy, how credit cards are being used instead, the ways UPI and credit cards are working together, their helpful features, and tips to benefit people economically using UPI and credit cards. Visit the DSA partner app that can help you choose the right loans.
How UPI Has Become a Game-Changer in Our Economy
Right now, UPI is the backbone of India’s digital economy. We are going towards cashless transactions. Read the following aspects that are crucial to learn.
- Mass Penetration
India’s preferred way of conducting digital payments is now UPI, processing more than 10 billion payments each month for over 300 million users in 2024.
- Cost-Effective Nature
Unlike credit cards, which merchants are charged a fee of 1–3% (MDR), UPI does not have transaction fees for users. By being cost-effective, UPI has grown to be used by people and companies all across the country’s changing digital environment.
- Security
Real-time money transfers happening on UPI are made safer by using two-factor authentication (2FA). Being both fast and safe has made UPI a popular payment choice, leading more people to use it for daily financial actions.
- Push from the Government
UPI Lite, UPI 123Pay, developed for feature phones and cooperative work with Singapore, are encouraging more people to use UPI. The new initiatives open up the market to more people, meet the demands of people from different groups, and secure access to efficient digital payments for everyone.
Impacts of UPI on Credit Card Usage in India
Since the use of UPI has gone up, there is a decline in the use of credit cards. Have a look at some of the consumer behavior we have noticed lately.
- Small Ticket Credit Card Transactions
Many people opt for UPI for small payments like groceries and utility bills since the transactions are free. Credit cards are now mainly used for high-value shopping, Express Installment Plans, and collecting points, which represents a switch in consumer habits.
- Credit Cards Are a Premium Tool
In order to keep users, banks are now adding better credit card offers, including more rewards, cashback, and access to lounges. Credit cards are better than UPI for building credit history, using flexible payment plans, and making transactions overseas.
- UPI-Linked Credit Cards
By giving RuPay credit cards UPI access, the RBI closed the gap between credit card use and digital payments. People can use credit features on UPI to pay at a later time, meaning there are no worries about paying instantly. Consultation with an expert will help in learning about DSA full form and more.
- Preferences for Merchants
Small vendors like using UPI since MDR charges are taken out, so it is more affordable for ordinary payments. On the other hand, big retail businesses still let customers use credit cards to meet the needs of big spenders. Using a credit card is widespread in e-commerce, travel, and luxury areas since these areas involve mainly expensive transactions.
Key Benefits You Can Expect
Different purposes are served by UPI and credit cards in India’s digital payments.
- There are no transaction fees on UPI for people; it is used by most vendors, and two-factor authentication is offered for added security.
- Still, there is no way to access credit with it, and its use is quite limited in other countries.
The Right Time to Use Credit Cards
When you pay using a credit card, you can repay big expenses like electronics or flights using flexible EMI. They give customers the chance to get rewards, lower prices, and free use of airport lounges, which attracts those seeking to enjoy convenience, lower costs, and more when traveling or shopping.
Credit cards are better for rewards on eating out, travel, and shopping, but UPI helps you spend within your limits by using the money in your account. Consult with an expert to learn more.
