The increase of credit card usage in India is reflecting economic growth and promoting consumer confidence comes with advantage but also with several risk. With the innovation of digital techniques, increasing consumerism and advancement in technologies, people are using cards, but forgetting the financial stress and burden it may create.
A credit card is a payment card issued by financial institutions to promote hassle free purchasing. It is beneficial for the cardholders to borrow money and purchase, repay the borrowed money later, with some interest.
Each cardholder is given a maximum limit, i.e. the maximum amount they can borrow using the card is fixed. It is a huge advantage to make purchases in case you don’t have money in your hand or bank.
But have you thought of the rising household debts? In India, it is a mountain climbing problem- 43% of GDP. Consumers are borrowing without keeping in mind their economic condition, especially the middle class and young populations. The EMI offers; Buy now pay later schemes encourages overspending.
According to the reports, credit card delinquencies (91-180 days past due) rose to 7.6% in late 2024-a worrying trend. Easy credit leads to less savings and more spending; this can damage your credit scores and future loan eligibility. Clear risks are High personal and national debt, risk of default and low savings, and even financial stress.
What is India’s action on this?
The Reserve Bank of India (RBI) is now leading the lending norms and keeping a monitoring check and credit card debts. Banks are already cutting down credit limits and introducing stricter KYC and income verification. Do you think, middle class families, especially post COVID-19 are depending upon credit facilities more than usual?
Credit-spending-debt-interest payments- low savings- more credits.