The rise of Credit Cards in India
The Indian economy is rapidly transitioning towards becoming less-cash centric, aided by policy and regulatory impetus in the form of Digital India and financial inclusion initiatives. Reflective of this, over the last three years, the number of credit cards in circulation has almost doubled to 48.9 million in May 2019. And it is not that just the number of cards has increased, the number of card transactions at point-of-sale terminals has also surged. Compared to October 2016, credit card transactions were higher by 95% in volume terms and 105% in value terms in May 2019. However, despite the recent surge, the credit card penetration in the country remains far below that seen in other major economies like the US, Europe and Latin America. With less than 4% of Indians with a credit card, there is more than enough headroom for growth. Even though the rising prevalence of credit cards does not seem to be slowing down any time soon, there is a fear that the emergence of alternative digital payment methods, such as through electronic-wallets, will threaten the sustainability of this growth.
Like credit cards, other digital payment methods, including e-wallets and mobile banking, have also registered a spectacular upsurge in acceptance among Indians. Most analysts predict that cash-less, as well as card-less payment methods, will become the primary form of transactions in the near future. But this does not mean that it is the end-of-the-road for credit cards as not only do they remain a safe and reliable payment model but also bring a host of other benefits not available with payment options. To begin with, most e-wallets and mobile banking applications allow customers to link credit cards to their services. At the same time, credit cards offer the ability to defer payments, which provides much-needed financial flexibility to consumers.
With readily available EMI (equated monthly installments) options, credit cards let people make big-ticket purchases without disrupting their monthly budgets. This way credit cards are also helping satiate the ever-growing demand for retail credit in the fastest-growing economy of the world. Driven by the rising prosperity and aspirations of population, retail credit to households in India has grown at a much faster rate than most other emerging markets over the last few years. Credit Cards are providing customers with an easy and hassle-free access to consumption-boosting micro-loans and helping them build up their credit scores. By using credit cards frequently in a prudent manner, users can enhance their credit scores, which in turn allows them to avail high-value debt such as home loans and car loans. With new modes of payment with little buyer protection being introduced every month, credit card remains a reliable mode of transaction. With a credit card, customers can make purchases without any fear of being duped due to the ‘chargeback’ facility.
It is clear that unlike other systems, credit cards are not just a payment method, but also a financial tool which can help Indians optimise their budgets while giving them a sense of freedom to spend. However, just as with any other tool, credit cards should be used wisely to maximise the potential savings and benefits. First of all, as a customer, you should be aware of all the charges and conditions on your card and take caution not to spend more than you can pay back. In order to avoid having to pay interest on outstanding card amounts, you can choose an EMI option for large purchases. In any case, you should always try to pay your credit card bills in full each month to avoid the interest charges. Credit Cards also reward you for using them through reward points or cash back in proportion to your spending. That means, the more you spend, the more you save in a year.
By choosing the right credit card provider, you can enjoy several unique perks not available with other payment modes. At RBL Bank, we offer exclusive services like easy EMI conversion, transfer of the outstanding balance of other credit cards to pay EMIs and instant cash. Then there are premium cards, which come with additional benefits, like priority check-in at airports, and unique partnerships with retailers for the convenience of customers. Our premium offerings include cards such as Cookies Credit Card, Shoprite Credit Card and Blockbuster Credit Card, among others. Remember, if you can use a credit card responsibly, there is nothing like it given the immense benefits and savings that come with it.
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