Credit card spending which turned a corner in December after four months of slippage in outstanding balances, continued to recover, though at snail pace, indicating that people have begun to swipe their cards, which was not allowed last year due to pandemic related lockdowns and social distancing orders.
According to Central Bank data, in January, the outstanding balance of all active credit cards edged up to Rs.117.29 billion in January from Rs.117.26 billion in December 2020. As at December 2019, credit cards had a total outstanding balance of Rs.121.49 billion.
January is typically a slower month for spending on high value items or leisure traveling as people come off from a year-end seasonal holiday, which for many became a drag due to months of stay-at home due to the pandemic.
In line with the decline in interest rates in the economy, the Central Bank ordered the banks to bring down interest rates charged on credit cards to 18 percent from 28 percent.
Card spend hardly reflects the health of Sri Lanka’s consumer market, as still a lot of transactions take place through cash in
However, the number of cards in issue has been growing every month, and in January banks added over 15,000 new cards into the portfolio of nearly 2.0 million cards.
As the New Year is approaching, banks are inundating cardholders with promotions, offers, discounts and easy payment schemes which are sometimes hard to resist.
The zero interest payment schemes are actually driving demand for consumer durables, which would help to keep that industry humming for a certain degree.
However the card users are often turned away by very high fees passed on by merchants to cardholders in what was referred to as ‘network fees,’ which effectively act as a punishment for using one’s card for payment.
Hence, rationalising these so-called network fees is imperative to facilitate the country’s journey towards a less-cash society.