There has been a shift in spending from credit cards to debit cards during the first quarter of the current fiscal, as Indians held back on discretionary purchases and went digital while paying for utilities and groceries.
According to data released by the Reserve Bank of India (RBI), spending under credit cards in June 2020 was Rs 42,818 crore, which was 36% lower than Rs 67,000 crore in January 2020. On the other hand, debit card spends stood at Rs 47,252 crore, which was only 24% lower than Rs 62,153 crore pre-Covid.
In terms of transactions, credit cards were used 12.5 crore times in June as compared to 20.3 crore transactions in January, while debit cards were used 45.8 crore times in January and 30.2 crore times in June.
The average spend per credit card in January was almost Rs 12,000, which fell sharply to Rs 7,474 in June, while the average debit card spend fell from Rs 761 to Rs 558 during the same period.
The average debit card spend is a fraction of transaction value in credit cards. But the sheer number of debit cards has resulted in the debit transaction outstripping credit by Rs 4,434 crore in June. For every credit card in the country, there are 15 debit cards. Incidentally in January credit card spends outstripped debit cards by Rs 24,000 crore.
“In metros, credit card spending has taken a hit as malls and travel was completely shut during the lockdown. While conventional spending in big retail was impacted, we have seen an excellent pickup in digital spending in smaller retail outlets in metros and in small cities. In all these small-ticket transactions, it is largely the debit cards that were used,” said Pine Labs CEO Amrish Rau.
In addition to debit cards, there has been a big shift from cash to UPI as well, which has seen over 150 crore transactions in August.
According to SBI Cards CEO Ashwini Kumar Tewari, credit card spending has improved since the ‘unlockdown’ and is back to 80% of pre-Covid levels. Also, the absence of spending using the physical card in certain categories has been compensated by online spending. “While there has been a drop in discretionary spending compared to the pre-Covid period, we are actually seeing a growth in EMI on card payment, which is used for the purchase of electronics, when we compare numbers with the year-ago period,” said Rau.
Another unusual aspect of cardholder behaviour is the tendency to bring down outstanding dues. Since March 27, customers have brought down card dues from Rs 1,08,094 crore to Rs 1,01,391 crore on July 31. This is despite a moratorium being available to borrowers during this period. As cardholders became aware that interest charges would continue, they reduced their dues. Instead, they have availed cheaper secured loans offering shares and bonds where the outstanding has gone up 20% to Rs 6,392 crore.