Indian bank card utilization has surged to new heights. Throughout the Diwali season of 2024, Indians spent ₹2 trillion throughout 433 million transactions, with the common month-to-month spend per card rising to ₹18,878. This marks a sizeable enhance from the ₹16,734 recorded in the course of the 2023 Diwali month. These figures present the rising reliance on bank cards for on a regular basis and festive purchases, pushed by attractive rewards, cashback affords, and no-cost EMI schemes. Nevertheless, this comfort comes at a value. Behind the record-breaking numbers lies the worrying pattern of rising bank card delinquencies and unpaid balances, monetary pressure for a lot of customers. For youthful customers, the dangers are much more pronounced as spending typically outpaces earnings. Let’s look into this pattern and assess what novice customers of bank cards should take into account going ahead.
The Rising Tide of Delinquencies
Bank card delinquencies have gotten a major concern in India. Knowledge from CRIF Excessive Mark reveals that defaults within the 91-180 days overdue (DPD) class climbed to 7.6% in June 2024, up from 6.5% in June 2023. Longer-term defaults are additionally on the rise, with overdue balances within the 360+ days class growing from 1.3% to 1.7% in the identical interval. Regardless of this, the bank card market continues to develop, with the variety of lively playing cards rising by over 13% to 10.6 crore in October 2024. This progress is fuelled by the recognition of rewards programmes, unique advantages, and the sheer comfort of cashless transactions. Nevertheless, on the flipside, shoppers should additionally concentrate on the 36% rate of interest due to which unpaid dues can create a debt snowball impact that may depart them financially strained. If extra shoppers depend on bank cards, the sample of rising balances and delinquencies will ultimately undermine the steadiness of our banks.
Harmful Overleveraging Amongst Youth
Younger bank card customers are more and more utilizing credit score for non-essential purchases, typically counting on EMIs to finance their spending. Life-style decisions, comparable to frequent eating out, gadget upgrades, and luxurious journey, at the moment are generally funded by means of bank cards. The convenience of changing giant purchases into EMIs typically masks the true value of those transactions. Whereas no-cost EMIs are sometimes supplied on digital purchases, different financing schemes will entice curiosity. Many customers fail to account for such costs, resulting in monetary pressure when funds begin overlapping with different obligations. Revolving credit score, the place customers pay solely the minimal due, additionally compounds the issue. It leaves balances accruing high-interest costs month after month, turning short-term borrowing right into a long-term burden.
Why Well timed Funds and Credit score Self-discipline Are Important
Paying your bank card dues on time is essential for sustaining monetary well being. Not solely does it forestall curiosity from accruing, nevertheless it additionally safeguards your credit score rating. credit score rating opens doorways to beneficial mortgage phrases and better credit score limits sooner or later. Conversely, late funds and defaults can severely affect your rating, making it tougher to entry credit score once you want it most. To keep away from monetary pitfalls, undertake a easy thumb rule: restrict your EMI commitments to 30-40% of your month-to-month revenue. For instance, in case your month-to-month wage is ₹50,000, your whole EMI obligations—together with bank card funds—mustn’t exceed ₹20,000. This ensures you will have sufficient room to cowl important bills and unexpected emergencies. Moreover, monitoring your credit score rating recurrently might help you keep on prime of your monetary obligations and keep away from surprises.
Tips on how to Use Credit score Playing cards Responsibly
Bank cards, when managed correctly, will be beneficial instruments for monetary administration and constructing a powerful credit score historical past. Begin by choosing a bank card that matches your spending habits, whether or not it’s for journey, eating, or on a regular basis purchases. At all times goal to pay the whole excellent steadiness inside the interest-free interval to keep away from curiosity costs. Keep away from utilizing bank cards to fund discretionary or luxurious purchases until you’re assured you’ll be able to repay the quantity on time. For younger customers, setting clear spending limits is important. Prohibit your bank card utilization to important bills and resist the temptation to overspend on non-essentials. Moreover, recurrently reviewing your bank card statements might help you determine pointless bills and make changes. Lastly, make the most of free instruments to trace your credit score rating and spending patterns.
Bank cards have revolutionised the way in which Indians spend, providing unparalleled comfort and advantages. Nevertheless, the surge in utilization has additionally revealed a scarcity of economic self-discipline amongst many customers. Rising delinquencies, overleveraging, and revolving credit score are indicators of a troubling sample that might escalate with out well timed intervention. The answer lies in balancing the advantages of bank cards with monetary prudence. Pay your dues on time, restrict your EMI burden, and keep away from utilizing credit score as a method to fund a way of life past your means. By adopting these habits, younger bank card customers can benefit from the perks of cashless transactions with out falling into debt traps.
The author is Head of Communications, BankBazaar.com, and co-author of the best-selling cash administration information, ‘The Bee, the Beetle and the Cash Bug’.
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