International credit card use up 63% after Covid-19, overtakes debit cards

Indians' spending on international credit cards has significantly outpaced spending on prepaid payment instruments (PPIs) and debit cards over the past 2 years. This trend is attributed to a surge in travel post-Covid-19 and the appealing reward points offered by card issuers. Despite the government's inclusion of international credit card transactions under the liberalised remittance scheme, which imposes a higher tax collected at source (TCS) rate of 20%, credit card spending has surged. Data from the Reserve Bank of India (RBI) shows a 63% increase in international credit card spending from December 2022 to July 2024, compared to a 53% rise in PPI spending and an 8% increase in overseas debit card transactions.

Head of cards and payments at CSB Bank, Mr. Ananth Babu, noted that banks promote credit cards due to higher interchange revenue from international transactions, including dynamic currency conversion (DCC) and foreign exchange mark-up rates. He added that the attractive rewards associated with credit cards drive customer preference. Head of cards and payments at Axis Bank, Mr. Sanjeev Moghe, highlighted that credit cards are preferred for convenience and widespread acceptance. While PPI usage has grown since December 2022, this growth is expected to slow due to limited applications. The Unified Payments Interface (UPI) international expansion is anticipated to capture a larger market share and offer more competitive rates, benefiting from oversight by the National Payments Corporation of India.

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.