4 Factors affecting Credit card usage India

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Time changes everything! That’s right.

Gone are the days when owning a credit card is bad for one’s financial life. Today owning a credit card is a luxury and premium.

This article focuses on rising credit card usage India, market share, prospects, etc.

Where did it all begin in India?

In 1969, City Bank introduced Diner’s Club cards, but the credit card industry gained popularity after Andhra Bank introduced its credit card.

Followed by the Central Bank of India along with Vysya Bank and United Bank of India introduced the Central Card in 1985.

In the same year, the Bank of Baroda and Allahabad Bank launched the Bob card.

But in the last five years, the credit card industry in India witnessed a growth of compounded annual growth rate of 20% per annum.

Today more the 7.8 Cr credit cards have been issued in India. But the credit card penetration in India is at a mere 3% rate.

Usually, Indians are averse to owning a credit card, but this trend is changing dramatically among the Indian younger population.

Recently credit card spending reached an all-time high of 1.37 trillion INR in March 2023. This is a 47.2% increase compared to the last year.

Why such change is happening? What factors drive those spending behaviors? To know more, please read ahead.

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Factors affecting credit card usage India

Rising Income:

In 2014, the per capita income is Rs 90,000, but in 2022 the per capita income is Rs1.5 Lakhs.

Due to the rise in income, there is a sharp increase in affluent spenders. Also, the median population age in India is 29.

Because of these favorable conditions like a young population, and rising income, etc. debit card, and credit card usage India is in increasing trend.

Prioritize Consumption over savings:

Baby boomers and Generation X preferred savings and investing in plots, Gold, and Fixed deposit.

Millennials and Gen Z prefer consumption over savings, this is a key factor in increasing the number of credit card users in India.

This factor is supported by decreasing household savings income, from 36% in 2014 to 28% in 2021.

Increasing Digitalization:

We have easy access to the internet, and the price we pay for the internet is affordable compared to various countries. Also,  ever-increasing smartphone users, coupled with COVID, demonetization, and UPI Payment created a robust digital infrastructure in India.

Digitalization touches everyone’s life not only in tier 1 cities but even in tier 2 and tier 3 cities. Thus digitalization helps to increase credit card penetration in India.

Rise of ECommerce:

Consumers visiting brick & motor shops to buy consumer durable products are becoming less and they prefer to buy online due to various availability of models, selecting the best sellers, comparing the prices, and finally discounts, cashback & rewards programs offered by various credit card companies increase the number of credit card users in India.

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India credit card comparison by market share:

credit card usage india


HDFC Credit card tops number 1 with a market share of 21%

SBI Credit card comes number 2 with a market share of 19%.

Nearly 80% of the credit card market is dominated by six players in India. They are HDFC, SBI, ICICI, RBL, AXIS, and Kotak Mahindra Bank.

The credit card business is a profit-generating arm for many banks. key metrics like market share, NPA, and Per Card Spend are important.

What’s interesting is the per card spend is topped by Karur Vysya Bank followed by IndusInd Bank Ltd. The Market leaders lag in terms of per-card spending.

credit card usage india
Source: CNBC


Credit card penetration in India

Right now, the total volume of credit cards stands at 8 Cr.

India is a highly underpenetrated market, where an average of 100 people owns 4 credit card.

But in countries like the UK, USA, and China ownership of credit cards stands at 91, 325, and 55 cards out of 100. Due to the growing economy and increasing consumption, nearly 2Cr people are applying for a new credit card every month.

The Future of the credit card industry is bright!

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Types of Credit Card Spenders

There are several types of credit card spenders, including:

  1. Revolvers: These are individuals who carry a balance on their credit card and pay interest on their unpaid balances. Revolvers are cash cows for credit card firms.
  2. Transactors: These are individuals who pay off their credit card balance in full each month and avoid paying interest.
  3. Rewards maximizers: These are individuals who use their credit cards to earn rewards points, cash back, or other incentives. They often strategically use their card to maximize their rewards.
  4. Big spenders: These are individuals who use their credit cards to make large purchases or to fund their lifestyle. They may carry a balance on their card or pay it off in full each month.
  5. Convenience users: These are individuals who use their credit cards for convenience, rather than for rewards or to carry a balance. They may use their card to pay for everyday expenses, such as groceries or gas.
  6. Balance transfer users: These are individuals who transfer balances from one credit card to another to take advantage of a lower interest rate or promotional offer.
  7. Credit builders: These are individuals who use their credit cards to establish or improve their credit scores. They may have a limited credit history or a poor credit score and are using their card responsibly to build their credit.

EMI – People who buy products and pay EMI contribute significant revenue to credit card firms.

Category of Credit card users:

In India, credit card usage has grown significantly in recent years as the country’s economy has continued to develop. Here are some common types of credit card users in India:

  1. Professionals: Many working professionals in India use credit cards to make online purchases or to pay bills. They may also use their cards for business-related expenses, such as travel or entertaining clients.
  2. Students: College students in India may use credit cards to pay for textbooks, supplies, and other expenses related to their education. Some credit card issuers offer special student credit cards with lower credit limits and features that cater to students’ needs.
  3. Travelers: With the growth of domestic and international tourism in India, many credit card users are frequent travelers. These users may opt for credit cards that offer travel-related benefits, such as reward points for flights or hotel stays, lounge access, or travel insurance.
  4. Online shoppers: As e-commerce has grown in India, many consumers are using credit cards to make purchases online. Credit cards offer a convenient and secure way to pay for online transactions.
  5. Rewards seekers: Credit card users in India who are interested in earning rewards, such as cashback or reward points, may choose credit cards that offer these benefits. Many credit card issuers in India offer reward programs that cater to a variety of spending categories, such as dining, shopping, or fuel purchases.

Final Thoughts

The number of credit card users in India is rising. Credit card is a nuclear bomb for one’s financial future if used unwisely.

There are significant benefits the credit card companies can offer to the consumers. But the consumers should remember ” There is no such thing as called free lunch”

Thank you for reading!

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