Credit cards are easier to get these days than they were a few years ago. Almost two years into the pandemic that scared the world, the use of credit cards in India seems to have come into its own. The reason for this is the culmination of causes, such as the fact that the use of credit card has become easier than before for the purchase of goods and services, both online and offline. Additionally, credit cards offer a contactless payment option, a fact that is attractive in today’s circumstances. Hence, the demand for credit cards has increased in India over the past few years.
Changing economic landscape
India, one of the fastest growing economies in the world, has long been trying to close the gap in credit supply compared to its Western counterparts. Recently, banks and other NBFCs (non-bank financial companies) have changed their focus, trying to generate interest in the “buy now, pay later” category and purchase products on EMI. Fintech players have disrupted the markets by offering new offers to customers. Traditionally, India has been a market where debit has been preferred over credit. However, a sea of change has occurred over the past decade and credit cards have been issued with flying colors. However, the increase in usage has not been as robust as in other countries that rely on credit for every expense. Nonetheless, credit apprehension seems to be rapidly fading among Indians, especially with Millennials and Gen Z population.
Credit card industry in India
In March 2021, India had 62 million credit card holders. In 2021, growth in new credit card issuance was only 7%, mostly due to the pandemic and economic downturn, but usage by those who already had credit cards was high. The economic atmosphere in India is rife with the popularity of credit cards, and banks as well as financial companies know this. With a growing, albeit slow, trend in credit card use, banks want to continue pushing credit card use so that most transactions are performed via plastic. Therefore, with the Indian government’s incentive to use more credit than cash, banks have started to make it easier for customers to get credit cards even with low creditworthiness. In the hope that one day one in five families in India will use a credit card.
How the banks relax
For a number of years, if customers did not meet the eligibility criteria, banks refused to approve credit card applications. What’s more, credit card eligibility the criteria that customers had to meet were strict and it was difficult for most customers to obtain a credit card, even if the will to obtain one was strong. However, since demonetization took place, the Reserve Bank of India has been trying to get banks to relax their strict policies and get more people hooked on using credit cards. Additionally, the Reserve Bank of India has attempted to compel banks to offer more rewards and benefits to new customers to encourage credit card usage. Nevertheless, in a game-changer of a policy, banks are simplifying their criteria for obtaining a credit card, either lowering their credit score eligibility or basing eligibility on criteria other than this.
Get a credit card easily
Customers with a low credit rating are issued credit cards based on other criteria, such as any source of income. You can also get a credit card easily by being a co-holder with someone who meets the eligibility criteria (while you can’t). Also, most banks had a usual minimum income requirement for basic credit cards, whether you were self-employed or salaried. Many banks seeking to attract credit card customers have relaxed this minimum requirement. Also, the minimum age for owning a credit card is now 18, but several banks have still set it at 21. This varies from bank to bank and from card to card.
Banks have simplified the processes and you can apply for a credit card online with most banks. The application process is now just a few simple steps and approval can be given within a day. Apart from that, different types of credit cards exist and choosing one according to your individual spending habits is easier than before. Thus, banks want to associate the credit card with the distinctive customer as precisely as possible.
Credit cards for the digital age
In September 2021, credit card spending by Indians jumped 57% on an annual basis, according to data released by the Reserve Bank of India. As economic activity in India improves, this will result in increased spending and more credit card applications. Also, if you have a bank account, you are likely to get an offer with a decent credit limit from your bank.