The government’s push towards making India digital has seen credit card usage by urban Indians growing by over 50 per cent in the past 12 months. A similar rise was also found in handling credit cards irresponsibly, finds a survey.

More than half, or 57 per cent, of credit card holders reported using their credit cards more often now than they did a year ago, found the survey done by TransUnion Cibil with global research firm YouGov Plc. Survey respondents reported various reasons for using their credit card. Among those surveyed, 59 per cent said used their credit cards to pay bills, 53 per cent for large purchases and 45 per cent used them over other forms of payment to gain discounts and other rewards during the past 12 months.

The research also showed that credit card usage varies demographically as most young adults aged between 18 and 24 years use credit cards over other forms of payment because they don’t like to carry cash. Those aged 45 and above use credit cards to make a purchase now and pay for it later. The survey also found that 19 per cent of urban consumers were likely to apply for a credit card in the future.

“Our survey shows that consumers today are confident of  using credit for daily purchases,” said Hrushikesh Mehta, vice-president and head of TransUnion Cibil’s direct-to-consumer business. “We are amazed by the growth of credit card usage in India and are glad to be able to offer information to consumers about responsible credit card usage, data diligence and credit-building,” he said.

However, the discipline much needed in the usage of credit cards was becoming lesser among credit card holders.  Not all of them are using their credit cards responsibly. Among the surveyed, 29 per cent said that in the past 12 months, they spent more on the credit cards than they had budgeted and 20 per cent said they have taken longer than planned to pay down credit card balances.

“Credit cards have a direct impact on one’s credit score as they provide insight into how consumers make borrowing decisions. Consumers who use credit cards must be vigilant about their Cibil score. They must take time to understand how it works and how using their credit card affects their score each month,” said Mehta.

The survey also found that many card holders had misconceptions about the card usage and its effects of credit rating. A surprising 56 per cent of survey respondents incorrectly believe that making the minimum credit card payment each month will have a positive effect on their Cibil score. In fact, making only the minimum payment can have a negative effect on credit, as a rise in the current balance on the card over time is an indication of an increased repayment burden.

About half of survey respondents falsely believe closing unused credit accounts will have a positive effect on their Cibil score. Closing a card that represents a long credit history or a large portion of available credit may rather have a negative impact.

sangeethag @mydigitalfc.com