Plastic is everywhere these days, even in our wallets! Though most of the plastic around us isn’t great for the environment, the plastic cards in your wallet can be quite beneficial. Let’s dive into the world of these plastic cards, commonly known as credit cards, and see how they have transformed the financial landscape in India.

The Evolution of Credit Cards in India

Over the past few decades, India has seen a remarkable shift in its financial practices. For a long time, cash was the primary method of payment, and using credit was often frowned upon. However, those days are behind us. The use of credit cards has surged across the country, indicating a broader change in how Indians manage their finances.

In April 2024 alone, the total credit card transactions in India amounted to a staggering ₹1.56 lakh crore. To put that into context, this sum exceeds India’s annual expenditure for healthcare. This figure highlights how deeply embedded credit card usage has become in the daily lives of millions of Indians.

A glance back to December 2011 reveals that there were fewer than 2 crore (1,76,72,337) active credit cards in India. Fast forward to today, and that number has grown nearly fivefold, with almost 10 crore active credit cards in circulation. This rapid expansion is expected to continue, with credit card transactions likely to surpass those made with debit cards in the fiscal year 2024. This change marks a significant shift in consumer behavior, driven by the convenience and benefits that credit cards offer.

Interestingly, credit card have been around in India longer than debit cards. The first credit card was issued by Diners Club in the 1960s, while debit cards didn’t make their debut in India until the 1980s, nearly 20 years later. This long history of credit cards in India has laid the groundwork for their current widespread use.

India’s Growing Appetite for Credit

Historically, access to credit in India was limited. But with the rise of a robust middle class, the growth of e-commerce, and the adoption of digital payments, the credit card landscape has undergone a profound transformation. This evolution has been marked by a significant increase in the number of credit cards in circulation, reflecting a growing appetite for credit among Indian consumers.

The demand for credit products has surged in recent years, driven by several factors. The rise of e-commerce has played a crucial role, making credit card an essential tool for online shopping. Additionally, the adoption of contactless payments has made it easier than ever to use credit cards for everyday purchases, from groceries to travel.

This “credit hunger” is evident in the rapidly increasing number of credit cards. In the fiscal year 2020 (FY20), there were around 57 million credit cards in use. By FY24, this number had doubled to over 101 million. This growth reflects not only an increasing comfort with using credit card but also a broader acceptance of credit as a valuable financial tool.

Credit card offer several advantages, including the ability to make purchases without immediate cash on hand, earning rewards, and building a credit history. However, they also come with drawbacks, such as high-interest rates and the potential for debt accumulation. Despite these challenges, the appeal of credit card continues to grow, particularly among younger consumers who are more comfortable with digital transactions and financial products.

The Impact on Financial Behavior

The widespread adoption of credit card has significantly impacted how Indians manage their finances. For many, credit card have become a primary tool for making payments, both online and offline. This shift has also influenced saving and spending habits, as consumers are increasingly using credit card to make larger purchases and manage their expenses.

The rise of credit card has also led to the development of new financial products and services. For example, many banks now offer credit cards with various perks, such as cashback, rewards points, and travel benefits. These incentives have made credit cards more attractive to a broader range of consumers, further fueling their growth.

Moreover, the increasing use of credit card has contributed to the growth of India’s financial infrastructure. As more consumers use credit card, there has been a corresponding increase in the number of merchants accepting them. This has created a more robust and interconnected financial ecosystem, benefiting consumers and businesses.

Empowering India: Credit Cards as a Catalyst for Financial Inclusion

Credit card have also played a role in promoting financial inclusion. By providing access to credit, these cards have allowed more people to participate in the formal economy, leading to greater financial security and independence. This trend is particularly important in a country like India, where a significant portion of the population remains unbanked or underbanked.

The way credit card has developed in India signifies a big change in the way customers deal with financial goods. From their humble beginnings in the 1960s to their current status as an essential tool for millions of Indians, credit card have profoundly impacted the country’s financial landscape. As more consumers embrace credit card, their influence on spending, saving, and financial behavior will likely continue to grow.