International credit card use up 63% after Covid-19, overtakes debit cards

Data from the RBI shows international credit card spending rose 63 per cent from December 2022 to July 2024, while PPIs grew 53 per cent and debit card transactions increased by just 8 per cent

Indians’ spending on international credit cards has increased more than that on prepaid payment instruments (PPIs) and debit cards in the last two years. This increase can be attributed to a surge in travel following the lifting of Covid-19 travel restrictions, as well as the attractive reward points offered by card issuers, according to a report by the Economic Times.

The growth comes despite the government's decision to include international credit card transactions under the liberalised remittance scheme, which imposes a higher tax collected at source (TCS) rate of 20 per cent on such transactions. The credit card industry is still facing challenges in implementing these regulations, the report said.

 

According to data from the Reserve Bank of India (RBI), international credit card spending rose by 63 per cent between December 2022 and July 2024. Spending through PPIs grew by 53 per cent, while overseas debit card transactions saw only an 8 per cent increase, said the ET report.

Ananth Babu, head of cards and payments at CSB Bank, told the newspaper banks are promoting credit cards because the interchange revenue from international transactions is higher with dynamic currency conversion (DCC) and foreign exchange mark-up rates. "From a customer perspective, credit cards are more preferred only because of the kind of rewards that come with it."

Despite the higher international transaction fees, customers favour credit cards for their convenience and rewards. Sanjeev Moghe, head of cards and payments at Axis Bank, said, "Credit cards can be used anywhere and customers just have to activate their card for international usage. It is like roaming in our phone networks."

Although transactions through PPIs have increased since December 2022, the industry expects that this growth will slow down due to the limited applications of such instruments.

The international expansion of the Unified Payments Interface (UPI) is expected to capture a larger market share as new corridors are established. Additionally, it is expected to provide more competitive rates due to oversight by the National Payments Corporation of India, the report said.