At least 75 per cent of the online transactions are done through credit cards, while it is 50 per cent in offline transactions, a recent report by Kotak Institutional Equities says.

Two-thirds of the spend through credit cards is for online transactions, while for debit cards it is one-third, it added.

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“The RBI data broadly suggests that the impact of UPI appears to be a lot stronger in hurting the growth of debit card transactions over credit cards at this point. Our conversations with credit card issuers are also suggesting that credit cards on the UPI platform are gaining traction,” said MB Mahesh, CFA, Kotak Institutional Equities.

Also, credit cards appear to be most dominant in West and South India as 75-80 per cent of credit cards are issued in Western and Southern India.

The outstanding share of credit cards issued by banks, excluding SBI Cards, has been relatively modest at 18 per cent on year.

“We are seeing some early impact of the recent guidelines from the RBI, which forces card issuers to close inactive cards (no transactions in the year and also new customers who have not activated their cards),” said Ashlesh Sonje, CFA at Kotak.

This growth has been modest, the overall spends and receivables and limit growth remain quite healthy at 20-25 per cent CAGR.

“We see card issuers getting a lot more comfortable in issuing higher limit cards for their consumers. This could be a reflection of better avenues to spend or greater comfort to use cards over other forms of payments,” added Sonje.

The report suggested that about 20 per cent of the cards issued in the lowest ticket size (<Rs25,000) contribute to 3 per cent of the total receivables for the sector.

At least 60 per cent of the overall credit cards have limits between Rs 25,000 – Rs 2 lakh.

A separate report by the Global Travel Intentions Study 2023 by Visa highlighted that the offerings like travel miles, cashback, rewards, high acceptance, foreign exchange rates, and high limits on spending remain the key factors that drive international credit card usage.

The survey revealed that 99 per cent of Indian travellers prefer to use cards (including credit, debit and prepaid) during their international travels.

Notably, in October 2023, credit card spending touched a record Rs 1.78 trillion aided by strong festive season purchases on e-commerce platforms.

Total spending via credit cards jumped 38.3 per cent year-on-year in October and 25.4 per cent month-on-month.

To encourage consumer spending during the festive season, banks and other financial institutions provide a wide range of alluring loan options with low interest rates, flexible repayment options, and enticing cashback or reward schemes.

This makes credit more affordable and appealing to customers and they purchase expensive items through EMIs.