Why Credit Cards Are Losing Credibility In India

In recent years, the credibility of credit cards in India has declined significantly, resulting in a shift in consumer payment preferences. Credit cards were once viewed as a symbol of financial independence and convenience, but they now face challenges due to a number of factors. Based on extensive research, this article intends to provide an in-depth analysis of the reasons for the declining credibility of credit cards in India. It will investigate the effects of the increasing debt burden, high interest rates and fees, security concerns, the advent of digital payment solutions, shifting consumer preferences, and the emphasis on responsible spending.

  1. Rising Debt Load and Impulsive Spending Habits: In order to comprehend the deterioration of credit card credibility, it is essential to examine the rising debt load of credit card users in India. According to research, simple access to credit and enticing rewards and cashback offers have led to consumers’ impulsive spending habits. The allure of accumulating rewards on every purchase may tempt cardholders to incur excessive credit card debt.

In India, the average credit card debt has increased by 30% over the past five years, according to a study conducted by a prominent financial institution. In addition, nearly fifty percent of credit cardholders struggle to make minimum monthly payments, indicating a worrying trend of revolving debt.

  1. High Interest Rates and Frequently Undisclosed Fees: Another crucial factor affecting the credibility of credit cards in India is the presence of high interest rates and frequently hidden fees. According to research conducted by the Reserve Bank of India (RBI), annual credit card interest rates in India range from 36 to 48 percent. In addition, credit card issuers may impose concealed fees, such as late payment fees, annual fees, and cash advance fees, thereby increasing consumers’ financial burden.

Lack of financial literacy and transparency regarding these terms and conditions may result in uninformed credit card use, trapping individuals in difficult-to-escape debt cycles.

  1. Security Concerns and Lack of Trust: Credit card fraud and security vulnerabilities have caused Indian consumers to have significant security concerns. India has experienced a 92% increase in financial cybercrimes over the past two years, according to a report by a prominent cybersecurity firm. The occurrence of unauthorised transactions, phishing attacks, and data breaches has eroded consumers’ trust in credit card issuers.

Due to security concerns, 35% of credit cardholders surveyed have less trust in credit card companies, according to research. This mistrust has prompted many consumers to pursue safer payment options, resulting in a decline in the use of credit cards for online transactions.

  1. Emergence of Digital Payment Solutions and Convenience: Mobile wallets, UPI-based apps, and digital payment platforms are acquiring widespread acceptance in India’s digital payment landscape. A financial technology research firm’s findings indicate that the volume and development rate of digital payment transactions have surpassed those of credit card transactions.

Due to multi-factor authentication and real-time notifications, consumers find digital payment methods to be more convenient, user-friendly, and secure. The convenience of conducting contactless transactions with mobile phones has accelerated the transition away from credit cards, particularly for daily transactions of low value.

  1. Generational shifts and shifting consumer preferences play a significant role in the deterioration of credit card credibility. Generations Y and Z, who make up a significant portion of India’s population, display distinct financial behaviours. According to surveys, these tech-savvy consumers prioritise fiscal responsibility, immediate gratification, and openness.

They prefer payment methods that provide real-time insights into their spending patterns and promote fiscal responsibility. The complex fee structures and interest calculations of credit cards may not align with these consumer segments’ financial priorities.

  1. Concentrate on Responsible Spending and the Use of Debit Cards: Consumers have opted for alternatives that discourage credit-based purchasing due to their growing awareness of fiscal responsibility and discipline. In comparison to credit cards, debit and prepaid cards, which restrict expenditure to available funds, are perceived as more prudent options.

63% of consumers prefer debit cards for day-to-day expenses, attributing their preference to their desire to avoid debt accumulation, according to research conducted by a leading consumer insights agency.


Credit card credibility in India has declined due to a combination of factors supported by in-depth research. Increasing consumer debt, high interest rates and concealed fees, security concerns, the emergence of digital payment solutions, shifting consumer preferences, and an emphasis on responsible spending have all contributed to this shift.

To regain consumers’ trust and credibility, credit card issuers must place a premium on financial literacy, transparency, and security, while also providing benefits and rewards that reflect consumers’ changing preferences. Adapting to the digital age and providing user-friendly interfaces can also help credit cards regain their relevance in India’s dynamic financial landscape.

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