NPS Credit Card Investing: High Rewards Hide Costly Fees

NPS investors are increasingly eyeing credit cards for contributions, hoping to snag reward points and milestone benefits. While cards offer payment flexibility and security, the allure of rewards often masks significant costs.

The Reward Temptation

Premium credit cards incentivize spending with points, vouchers, and travel perks. For large NPS contributions, especially near tax deadlines, using a credit card can seem like a strategic way to boost these benefits. Building a credit history through timely payments is another perceived advantage.

Unseen Gateway Costs

However, using credit cards for NPS transactions incurs mandatory payment gateway (PG) charges. These typically range from 0.75% to 0.85%, plus an additional 18% Goods and Services Tax (GST) on the fee itself. For an annual NPS investment of ₹1.2 lakh, these charges can amount to ₹1,000 to ₹1,200, effectively erasing small reward gains.

A financial expert noted that even with 1.25% cashback, the net gain might be minimal, often less than ₹400 after fees. Furthermore, reward point valuations can vary, and card issuers increasingly cap or exclude government and financial transactions from reward schemes, making the economics precarious.

The Smarter Alternatives

For the majority of NPS subscribers, simpler payment methods like UPI, debit cards, or net banking present a more straightforward, cost-effective approach. These options bypass the substantial gateway fees associated with credit cards, aligning better with NPS's objective of providing a low-cost, automated retirement savings platform. Credit cards might serve as an occasional tactical tool, but they are not a default superior payment method for NPS.