Credit Card Spending Loses Momentum After Festive Season: Report

Credit card spending has witnessed a moderation in the month of November after witnessing a spike in the month of October 2024 on account of the festive season. Credit card spending for the month of November witnessed a 16.1 per cent month-on-month (MoM) drop compared to November as it fell to Rs 1.7 trillion.

The report also said that spending via Point-of-Sale (PoS) transactions also fell by 14 per cent MoM and online spending declined by 17.5 per cent MoM. The report added that the drop was expected as the spending witnessed in the month of October was on account of the festive season.

Even as credit card activity witnessed a decline in the month of November, HDFC Bank increased its market share by 30 basis points MoM. On the other hand, SBI Cards & Payment Services’ market share fell by 90 basis points on a MoM basis. Other players in the credit card space such as ICICI Bank and Axis Bank witnessed a drop in market share of 20 basis points MoM and 120 basis points MoM, respectively.

The total credit card issuance (Cards in Force or CIF) in the month of October remained moderate at 107.2 million increasing by only 0.3% MoM. The growth remained moderate due to stricter scrutiny by the Reserve Bank of India (RBI). Despite a moderate increase the report found that HDFC Bank has been issuing new credit cards at a more intense pace than the other players.

The report also claimed that the asset quality trend for credit cards seems to be weak. InCred Equities also mentioned that there are concerns about asset quality stress increasing with the rise in 90+ Days Past Due (dpd) by 14 basis points.

“The asset quality trend seems to be weak, as seen in caution over new cards issuance by most players. There are heightened concerns about asset quality stress building in with the rise in 90+ Days Past Due (dpd) by 14 basis points quarter-on-quarter to 1.8 per cent, as per TransUnion CIBIL India,” Incred Equities said in the report.

The report also cited concerns such as rising number of defaults from new-to-credit customers especially from Tier-2 cities and beyond. Credit card defaults occur when a cardholder doesn't pay their bill for a prolonged period of time, usually 180 days or more.

“We are witnessing rising defaults by new-to-credit (NTC) customers who are facing difficulty in paying their dues on time, specifically from Tier-2 cities and beyond. Consequently, we are observing a higher focus on premium cards by select players,” InCred Equities said in the report.