Credit card spends 30 times more than debit card: RBI

Debt may be a dirty word for most Indians, yet a lot of them use a credit card for an average payment amount of about Rs 55,000 a year, which is nearly 30 times the money spent from debit cards.

At the same time, the number of debit cards in usage in the country is more than 15 times than that of credit cards, according to data available with the Reserve Bank of India (RBI).

During the last fiscal (2011-12), there were a total of 1.76 crore outstanding credit cards in the country, which rose further to 1.8 crore in the first quarter of the current fiscal. On the other hand, the number of debit cards stood at over 29 crore as on June 30, 2012, up from 27.8 crore at the end of last fiscal, the latest RBI data shows.

During fiscal 2012, the total amount spent through credit cards was Rs 96,614 crore, which gave an average transaction size of Rs 54,738 per card in a year. In comparison, debit cards were used for transactions worth Rs 53,432 crore in 2011-12, leading to an average transaction size of Rs 1,920 on every card in a year.

Basically, a credit card allows people to pay for goods and services based on a promise to repay the money to the bank with some interest costs, while a debit card facilitates payments from the actual amount lying in the customers’ bank accounts. In the first quarter of the current fiscal, the average credit card transaction size for a year is nearly 29 times of the debit card payments.

In the April-June period of this fiscal, a total of Rs 28,465 crore were spent through 1.8 crore cards, giving an average of Rs 15,805 for these three months. In comparison, the average transaction amount for this period was Rs 528 crore per debit card.

Further, during the last five years, the average credit card transaction size has grown nearly three-times from Rs 19,554 in 2005-06 to Rs 54,738 in 2011-12 as economic growth fuelled consumer aspirations as well as purchases.

On the contrary, the average payment size for debit cards during the same period stayed largely stagnant, rising from Rs 1,185 in 2005-06 to Rs 1,920 in 2011-12.
This is despite the number of credit cards remaining largely unchanged from 1.7 crore in 2005-06, while the number of debit cards has risen sharply from 4.97 crore in that year.

Less debit card usage

Experts opine that one of the reasons for lower debit card transaction size could be the frequency of usage. A credit card was used by its holder over 18 times in 2011-12, while a debit card was used barely once on an average.

The number of credit card swipes in a year has doubled from nine times in 2005-06, while the debit card usage inched up from 0.92 times to 1.18 times during the same time.
The wide difference in deal sizes is partly also explained by the trend that credit cards are mostly used to purchase high-value items, while a debit card is used just as an alternative to the cash.