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Last Updated : 2024-05-10 00:00:00
The credit card activity, which remained anaemic for a prolonged period, appears to have broken its trend and set off to potentially a robust run of spending in the period ahead. The cardholders were seen swiping more frequently for their festive spending and leisure and travelling needs in December last year.
The latest data available showed that in December 2023, the cardholders have ramped up their spending considerably, as the outstanding credit card balance of the licensed commercial banks has jumped by a robust Rs.6,176 million, the largest monthly increase from a very long time.
This was in comparison to the Rs.1,205 million increase in November and Rs.309 million contraction in the month before.
The trend points to a sharp acceleration in the spending by the card users for their spending, as they appear to have felt a bit more ease to stretch their budgets, with the cooling inflation and softening interest rates.
The consumer sentiments in December also saw picking up, although that could be tempered by the January tax hike and the sharp increase in the prices of consumer goods.
However, the Central Bank is confident that the current price pressures wouldn’t last long, as inflation would settle at its medium-term target of around 5 percent, after a few months of running above the midpoint.
Despite the December jump in card balances, the full-year gain came in only a bit higher at Rs.8,275 million, reflecting that almost all the increases in 2023 came during the last two months.
December is however a month with some heightened activity, due to the year-end festive demand, where the people usually loosen their purse strings than in any other period of the year, except during March and April, for the traditional new year celebrations.
While the ceiling interest rate in cards’ outstanding balance was cut to 28 percent in September, from a high of 35 percent, it is expected that the Central Bank would further slash the maximum rate chargeable on cards in the near future, as the lending rates in the economy are easing faster.
This could add a further tailwind to the still nascent consumer spending and thereby, the spending made via the credit cards.
Meanwhile, the data also showed that the banks, which had until November trimmed their card base, had once again begun to promote and expand their cards business, as the number of active cards had increased by 4,085 cards in December.
However, the total of active cards for the full year still shows a shrinkage of 35,906 cards.
VJ Tuesday, 06 February 2024 09:17 AM
Credit card expenditures mean people are spending money they don’t have. Interest rates are high and most businesses charge 3.5% extra when paid with credit cards. How can this be a positive sign.
Cognize Analytics Tuesday, 06 February 2024 09:23 AM
With a VAT increase announced in January, consumers would have prioritized high value spending using cards to save the 3% extra VAT. Interest rate drops the banks are yet to give the full benefit to the consumers.
Limit Expenditure on CC’s Tuesday, 06 February 2024 10:05 AM
Be vary as most might default on their payments
Lost of Jobs due to Uncertainty Tuesday, 06 February 2024 04:32 PM
The economic under certainty is ever increasing
Gerald Paldano Tuesday, 06 February 2024 01:52 PM
What a way of expressing something of high concern...'People did not have money to spend during Holidays and had to buy on credit, thus unwillingly entering the debt trap' should be more like it! Stop sensationalizing news that should be looked at with grave concern...
DOT Tuesday, 06 February 2024 04:20 PM
I stoped, frankly I canno't afford.
Amara Tuesday, 06 February 2024 04:41 PM
Due to BLACKFRIDAYs and Various seasonal fake discounts people are buying vith credits, This is really sad as they can't buy as they want any time they wish.
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