All about the credit card

Reverse your life by 20 -25 years

Reverse your life by 20 -25 years. Visualize on a nice afternoon, you are sitting in a restaurant with your girlfriend. After a sumptuous meal, the waiter comes to you with the bill. You smile at your girlfriend and grab your purse. But you find yourself in a fix as you are short of cash. What do you think the situation will now be? You go to a restaurant, go for a movie or book your tickets; you seldom bother about having cash in your pocket. You just need to swipe your card to get things done. This is credit card for you!

Credit cards started rolling somewhere in the late eighties or early nineties in India. The credit card industry in India has registered exponential growth from FY2001 to FY2008, which is shown in the graph below. As it can be seen that the No. of credit card issued was only about 50 lakh in the FY2001 which rose to 275 lakhs i.e. more than 5 times by FY2008. However, the figure shows a dip in the numbers after FY2008, which can be primarily attributed to the financial downturn and growing concerns of delinquency rate in the credit card industry.

Despite the decrease in credit card base, the credit card spends increased during the year 2009 and 2010. The value of transaction grew from Rs 25,686 crore in FY2005 to Rs 65,356 crore in FY 2009. This can be attributed to growth in e-commerce and transactions via internet. Shopping, jewellery, dining and travelling contributed to more than 70% of the value of credit card transactions. Airlines and railway tickets were the primary drivers in the travelling segment.

So, what is in store for the consumers? The no of credit cards issued has declined from FY2008; the credit card issuer seems to be more hesitant in issuing the cards due to the increasing delinquency rate. This means that banks will be more careful in assessing the credit history before issuing a card. It is evident from the recent developments that have taken place in the industry. Some of the banks have rolled back the lifetime free facility on all their cards after the financial global downturn. SBI credit card has started charging fees even for entry level cards. Standard Chartered bank has withdrawn gold cards from its shelf and, for the premium segment; it has retained just the platinum card.

All about the credit card

By: Bhavana Jhingan

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