Credit card spend soars in December 2024

The festive December 2024 saw credit card holders swiping their card the most last year with the outstanding card balance shooting up, bringing almost the entire growth in the card debt for 2024 in one single month.

The data showed that card holders have spent heavily from their credit cards in December 2024 with card debt going up by as much as Rs.6.45 billion, changing the full year card debt only by a very little.

For instance, for the full 2024, the card debt has risen by Rs.6.59 billion, taking the year-end balance to Rs.151.37 billion.

Despite interest rates on cards having come down from their sky high levels reached in the early part of 2023 due to the interest rate shock applied by the Central Bank, they haven’t budged much to woo many card holders to use their card debt for their wants and needs.

The credit card interest rates still hover around the mid 20 percent levels which are considered way too high given where the key policy rate and most other lending rates have settled. For instance, the prime lending rate fell further down last week by 17 basis points to 8.42 percent, touching the 12-months treasury bill yield this week while the average weighted new lending rate which is the closest benchmark for the new lending by the banks have come down to 10.77 percent by the end of December last year.

This rate may have come further down by now given the easing financial conditions in the economy.

The banks still are sticking to their over 20 percent interest rates on their cards, hence potentially prompting the Central Bank to set a new cap at a lower level.

However, it is yet to be seen if the Central Bank at present would want to intervene in setting lending rates as they would like to have a light touch on intervention, allowing the market forces to operate.

The banks are also still a bit cautious to bring their card rates down given the still fragile nature of the consumer despite signs of increasing consumer spending.

At least half of the listed companies which have reported their financial results for the December 2024 quarter have underwhelmed both the investors and the analysts, raising serious questions about the consumer strength and their spending.

Point-to-point headline inflation, despite being negative for four months, fails to provide an effective gauge for consumer health.

Meanwhile, the banks issued 18, 476 new cards in December 2024, clearly reflecting that they are ramping up their card issuances after nearly three years of slow going.

For the full year, the banks issued 53,045 new cards, taking the total active cards to 1.97 million.