Decoding – The Impact of RuPay Credit Card & UPI Linking

Impact of rupay credit card and upi linking

Now you can link your RuPay credit card with UPI and enjoy paying your bills by scanning a QR code! Yes, it sounds great. But do you think it is as simple as it sounds? Unfortunately, it’s not. Let’s decode how this move impacts merchants, and most importantly, how will this affect you as a customer?

What’s Happening?

Every shopkeeper today accepts UPI-based payments such as Google Pay or PhonePe, whether a jeweller or a local kirana store, because the citizens widely accept this payment method.

No matter what you purchase, the amount is debited from your savings or current account. That’s because until now, we only had access to link our debit cards with UPI IDs. 

But, now RBI has come up with a revolutionary change where your RuPay credit card can be linked with your UPI ID. From now on, you don’t have to go through the hassles of carrying your credit card everywhere. Just slide your phone into your pocket, and you are good to go! 

Everything sounds good until now. You have access to pay through your credit card without carrying it in your bag. You can also enjoy the interest-free period. But here, the plot twist is with Merchant Discount Rate (MDR) charges. 

To understand the impact of MDR, you need to understand the revenue generation framework of credit card companies. 

Revenue Framework of Credit Card Companies

So, whenever you pay using a credit card, the merchant pays an MDR charge to the card issuing bank. Depending on the card type, this charge varies between 1.5% and 3%. This is a revenue source for the card issuer. The cost of reward points, 45 days interest-free period, and everything else is covered by the MDR.

RuPay credit cards have lower MDR as compared to Visa and Mastercard. And in the case of UPI transactions, no MDR is to be paid. And this is one of the reasons why UPI is so successful and most loved by merchants. 

RuPay credit cards and UPI can now be linked, but there is still no clarity on how much MDR will be levied on these transactions. 

What Lies Ahead?

Merchants will have a gala time if low MDR is levied on this new system, but customers will also have to let go of their precious reward points. Wondering why?

As we just saw, MDR covers the cost of everything you enjoy, including your interest-free period and the rewards you earn.

So, a low MDR refers to low revenue generation for the card issuing bank. Hence, they might cut down on the reward points they offer on RuPay credit cards. 

But don’t worry. Things have still gotten easier for you with this new regulation. So, the next time you go shopping, carry your phone and enjoy your day!

That’s it for today.

Until then… Don’t forget to share this article with your friends.

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