SUNANDO ROY – On Banking, Finance and Society

One of my friends once commented ” Credit Cards are Roads to Hell” . The statement was made decades earlier, when credit cards were entering the Indian financial product scene, but remains valid, and truer than ever before. The undeniable convenience of credit cards come with a huge price tag, where overspending can seriously disrupt one’s financial profile.  To understand the consequences of  sitting on credit card balances, one must get a feel of India’s credit card market, which has experienced remarkable expansion in recent years. More people are using credit cards, transaction volumes are growing rapidly, and outstanding balances have risen significantly. Yet, despite this surge, critical details about how cardholders actually use credit remain unclear. Specifically, the split between transactors—those who pay their balances in full each month—and revolvers—those who carry forward debt and incur interest—remains elusive, as little behavioral data is available in public domain.

Explosive Growth Trajectory

The overall market size has expanded at a rapid pace. Outstanding balances grew from ₹87,686 crore in March 2019 to ₹2.90 lakh crore by May 2025, representing a 44% year-on-year increase. The number of active credit cards reached 111.2 million by June 2025, up from 108 million at the end of 2024. Interestingly, while balances grew, the average balance per card actually declined from ₹32,233 in June 2024 to around ₹26,100 in June 2025. This trend may reflect the growing adoption of Equated Monthly Installments (EMIs) and Buy Now, Pay Later (BNPL) products, which spread repayment more evenly.

Transaction volumes also highlight the boom. In July 2025, monthly credit card spending hit ₹1.93 lakh crore, a 31% increase compared to the previous year.

The Revolver Problem

Despite the market’s strong growth, the lack of clear information on repayment habits raises concerns. PwC’s 2021 report estimated that 15–20% of cardholders are revolvers, yet they account for 40–50% of issuers’ revenue. Interest rates for revolvers are steep, typically ranging from 30% to 48% annually, making credit card debt among the costliest forms of consumer borrowing in India.

If we assume total outstanding balances of ₹2.90 lakh crore accrue interest at an average APR of 36%, annual interest income would total about ₹1.04 lakh crore. Spread across 111.2 million cards, this equals roughly ₹9,360 in annual interest per card. However, because only a small percentage of users are revolvers, their actual annual burden is far higher—estimated between ₹47,000 and ₹62,000 per card. For many, this creates a heavy financial strain, especially when combined with EMI conversions and co-branded card fees.

Risks and Market Dynamics

The rapid growth has been accompanied by rising risks. TransUnion CIBIL reported that credit card non-performing assets rose to 1.8% in mid-2024, driven by millennial overspending on discretionary items. Meanwhile, RBI data shows that non-food bank credit growth slowed to 10.2% year-on-year by June 2025, suggesting a cooling credit environment.

At the same time, innovation in the payments space has supported growth. The integration of credit cards with UPI boosted transaction volumes by 10–15%. Issuers have also experimented with dynamic APRs, such as IDFC’s 9–36% range, in an effort to provide more flexible borrowing options.

Policy Implications

The absence of behavioral data on credit card repayment habits leaves consumers vulnerable to underestimating the true costs of revolving debt. Without clear disclosure, financial literacy campaigns may struggle to resonate with users who fail to recognize how quickly interest accumulates.

Policymakers could address this issue by mandating public disclosure of transactor versus revolver ratios, requiring issuers to present effective interest costs in monthly statements, and leveraging the growing self-monitoring trend—100 million Indians checked their credit scores in FY24—to strengthen awareness campaigns. Such measures would ensure that India’s projected 116 million cards by the end of 2025 empower users rather than burden them.

Summary Table

Sources : Various news reports.