Credit card spending in the country touched a record high during the April- June quarter, thanks to innovative incentives offered by card issuers to their customers.
In the first three months this financial year, consumers spent Rs 28,465 crore on their credit cards across point-of-sale (POS) terminals, latest data released by the Reserve Bank of India showed. On a sequential basis, spending on credit cards increased 9.9 per cent, its fastest rise in the past four quarters.
Bankers said consumers spent more on credit cards in April-June than in financial year 2003-04 and 2004-05.
“The risk of defaults has declined sharply, as banks now have access to credit bureau data to study customers’ credit history. Hence, the offers that disappeared from the market during the financial crisis of 2008-09 are back,” said Jairam Sridharan, senior vice-president and head of consumer lending and payments at Axis Bank.
“Merchants and credit card companies are partnering each other, thinking of creative ways to increase spends on credit cards. Hence, we are seeing this trend,” Sridharan added.
According to bankers, the incentives offered for credit card usage and the growing acceptance of plastic money have contributed towards the rise in spend.
Bankers said many consumers, who were so far using only debit cards, are now shifting to credit cards to take advantage of the interest-free credit period. Most consumers still prefer to pay off their dues before the expiry of the due date, they said.
“Indian consumers are becoming savvy and prefer to use credit cards to avail the interest-free credit period and the discount offers by large retailers in the country. They still prefer to pay the entire amount before the due date. As the market matures, we expect more and more customers will start using the EMI (equated monthly instalment) option,” said Kadambi Narahari, chief executive officer of SBI Cards, the credit card joint venture between State Bank of India and GE Capital.
While retail purchases and travel expenses still form the majority of credit card spending, consumers are also using their cards to pay insurance premiums and mobile phone bills.
“The spends growth has been fairly healthy. A number of options are now available to consumers for using credit cards. You can pay your utility bills or book a movie ticket. There are incentives to encourage spending in these areas. For instance, there are offers where if you buy a movie ticket using your credit card, you will get another ticket free,” said Shyamal Saxena, general manager for retail banking products and consumer banking at Standard Chartered in India and South Asia.
At the end of June, the number of credit cards in the country was 18.01 million.
