The Resistance, Acceptance, and Growth of Credit Cards in India

From the dawn of time, money has undergone an evolution perhaps as diverse as that of man. From clay coins to those made of various metals, it was a long time before the paper bills of today came into existence. Throughout this history, one item has constantly stood out as the most innovative and useful transaction tool: credit cards. The first transaction recorded, which created the foundation of the modern credit system, came from ancient Mesopotamians over 5,000 years ago, who used clay tablets to conduct trade with the Harappan civilization.

From clay tablets, the first cards that were highly popular were not made of metal but instead cardboard. In 1949, Frank McNamara and Ralph Schneider created the ‘Diner’s Club Card’, a small cardboard card widely considered to be the precursor of modern credit cards. Club members could use the card to reimburse their meals at select restaurants, which would send the bill to Diners Club. In turn, it would directly pay the restaurant’s bank, taking a small commission. Patrons would have to clear their card’s stored-up dues every month. 

In 1958, American Express introduced the first form of credit card, to give more flexible paying options to its travellers, who could pay their bills monthly in exchange for an annual membership charge. The same year, Bank of America launched the first consumer credit card, called BankAmericard, which was also the first to offer credit rollover. In 1976, BankAmericard changed its name to one known by nearly everyone today– Visa. Earlier in 1966, several California-based banks came together to form the Interbank Card Association (ITC). In 1979, ITC renamed itself to introduce another word that would soon become synonymous with credit cards– MasterCard.

A year after the first plastic Diners Club Card was introduced worldwide, Kali Mody was the first Indian businessman to launch it in the country in 1961. However, only those who lived or frequently travelled to foreign countries opted for this legacy transacting tool. 

In 1980, the Central Bank of India brought out the first bank credit card, followed by Andhra Bank, both of which were Visa cards. Vijaya Bank was the first to introduce MasterCard credit cards to Indians in 1988. Notably, a key difference between the two was that the latter also allowed customers to withdraw money from Vijaya Bank’s branches. Even back then, only those customers were eligible for credit cards whose income came under a minimum annual range.

From 1988 to 1993, numerous PSU banks began issuing credit cards to select customers. Around the same time, HSBC Bank launched the ATM concept for the first time in India in 1987. Indian banks started capitalising on this trend and began to issue debit cards to customers. People gladly embraced the convenience of withdrawing money from their accounts whenever needed by using an ATM machine. This led to debit cards getting the name ‘ATM cards’. 

Unlike debit cards, their credit counterpart took a long time to get accepted by Indian citizens, who saw credit cards as a risky liability. Moreover, people were finding it hard to swallow that the overall manner of conducting transactions was changing. Furthermore, the very word ‘credit’ was frowned upon by the wide Indian consumer base.

Thus, in the initial years of its introduction, the popularity and use of credit cards suffered largely from this anti-credit mindset. Most people were unwilling to take up this new financial tool since they felt that credit cards come with a high liability factor that they might be unable to repay. Even then, the consequences of delaying or defaulting on the due credit payment were harsh, not only legally but also socially.

It was the standout feature of spending now and paying later which lured people to finally accept this unique plastic piece of currency. The market of credit cards began in India in 1981 with the Visa-issued card, but its proper boom came much later. Back then, Andhra Bank led the country’s market growth for credit cards in the country.

Gradually, as people’s income increased and the use of modern technologies and the internet gained speed, the use of credit cards spread to various economic sections of society, from businessmen to salaried individuals. Since then, credit cards have not just been accepted but have also been popularised and made a commonplace spending tool. They are used exponentially across the country for a number of useful facilities, and rightfully so. Just think about it, you can use your credit card to withdraw money, pay for your utility bills and other payments, buy an expensive item and pay for it in instalments, etc.

So, what really led people to rush to their banks and sign up for a credit card? Here’s why – 

• Banks became more flexible in handing out credit cards, as CIBIL and other credit bureaus cropped up, making it easy to keep track of customers’ credit scores.  
• The exponential rise of e-commerce also led more and more consumers to choose credit cards for easy online shopping via digital payment methods.  
• Banks and other merchants started providing customers with lucrative offers on taking credit cards, like discounts, rewards, cashback, etc.  
• The higher understanding of how important the concept of buy now and pay later is, remains the main highlight of credit cards even today.  
• The Indian Government also took up several key measures through regulatory bodies to increase the accessibility of credit cards, along with a keen focus on increasing digitalisation. 

According to RBI data, Indian banks issued a record total of 2.98 crore credit cards in March 2017. In June 2022, citizens used credit cards to conduct over 6.78 lakh ATM withdrawals and almost 12.1 crore point-of-sale (POS) transactions. Earlier, credit card transactions had drastically fallen from March to May 2020, buckling under the effects of the COVID-19 pandemic. 

At the end of the September quarter of 2022, the total number of debit and credit cards circulated around the country crossed 100 crores. As of November 2022, Indians boast around 7.7 crore active credit cards, a number higher than the total population of the United Kingdom! Analysts predict that the number of credit cards in India will increase by 33 lakhs between 2022 and 2028, marking a growth of 7.83%. 

Credit cards are becoming so popular and mainstream for Indian customers and at such a breakneck speed that the above statistics and predictions do make sense! They offer an easy alternative to digital payments and also come in handy for sudden bulk payments like medical emergencies. Another feature of credit cards that is gaining traction is that they can provide you with unsecured personal loans. These come with very low interest and processing fees, and you can repay them in monthly instalments. 

Moreover, credit cards are your go-to solution in building a credit history, thus providing you with a credit score that, in turn, decides if you are suitable for low-interest loans. With all these benefits, besides the usual rewards programmes, air miles, coupons, and cashback that credit cards offer, they are indeed a multi-purpose payment tool. Whether you own a credit card or want to start afresh, you can always check out the various types of credit cards available today with key benefits and features. Begin your credit journey today!