COVID-19 impact | Consumers move to debit cards from credit cards

Since the lockdown, spending has shifted to debit cards from credit cards as consumers pause larger purchases and use debit cards to pay for groceries, utilities and other essential products and services.

Spending from credit cards was Rs 42,818 crore in June 2020, lower than the value of Point of Sale (PoS) transactions from debit cards was Rs 47,255 crore, according to data released by the Reserve Bank of India (RBI).

The value of credit card transactions in June was 36 percent lower than Rs 67,002 crore recorded in January 2020. Debit card spending in June was nearly 24 percent lower when compared with Rs 62,153 crore in January.

According to the RBI data, spending from debit cards was higher than the value of credit cards transactions in March, April and May of 2020, a reversal of the trend recorded in January and February.

In June, 12.5 crore credit card PoS transactions were recorded, as against 20.3 crore in January. The number of debit card transactions declined to 30.2 crore in June from 45.8 crore in January.

"In metros, credit card spending has taken a hit as malls and travel was completely shut during the lockdown. While conventional spending in big retail was impacted, we have seen an excellent pickup in digital spending in smaller retail outlets in metros and in small cities. In all these small-ticket transactions, it is largely the debit cards that were used," Pine Labs CEO Amrish Rau told The Times of India.

"While there has been a drop in discretionary spending compared to the pre-COVID period, we are actually seeing a growth in EMI on card payment, which is used for the purchase of electronics, when we compare numbers with the year-ago period," Rau added.