Credit card spend picks up in April by Rs.4.4bn

There has been some modest pickup in credit card spend in April reflecting that consumers are ramping up spending on everything from their staples to discretionary such as dine-outs and recreational activities as conditions turn relatively better while prices ease and the interest rates decline.

The latest data available for April showed that the licensed commercial banks had extended credit card debt worth Rs.4,381 million in the month alone. This could be attributed to the festive month where people spend more on everything from food staples to durables to leisure to dine outs to other recreational activities.

Growth in outstanding credit card balance in April, though relatively small, also coincides with the Rs.87 billion in total private sector credit for the month. However, credit card spend isn’t a close proxy for consumer spend as still a large swath of people transact in cash.

Further, most spending in cards also do not entirely show in the outstanding card balance as many tend to settle what they spend on or before the due date.

Despite April showing a relatively considerable level of expansion in outstanding credit card balance, the total for the first four months was only Rs.1,879 million.

This reflects that card holders haven’t still started swiping their cards more meaningfully for their purchases.

Further, the interest rate on credit cards at 26 percent is still restrictive given where most of the other rates stand. Hence the credit card interest rates are long overdue for correction downwards.The banks in April issued 16,812 new cards bringing total new cards issued in the first four months to 47,038.

By the end of April, there were 2,055,494 cards in issue. The banks are also seen running aggressive campaigns to woe card holders to spend from their cards with various attractive offers and easy payment schemes.