Celebrate with Joy, Not with Debt – Here’s How to Keep the Festivities Stress-Free!

With great credit cards comes a great risk of credit card debt. As the festive season approaches, many consumers in India start preparing their wishlists on several online platforms. These platforms offer great deals, but it’s crucial to understand that getting into these lucrative offers also marks the beginning of your debt cycle. Most of us do not realise this instantly, but over the time, things can become really suffocating, leaving no room for following your budget essentials. In FY 2024, credit card spending increased at a great rate. This blog goes through the trends in credit card spending during the festive season. You’ll understand the implications of credit card debt and strategies for managing finances effectively during this financially intense period.

Surge in  Credit Card Expenses in India

“With credit card spending surging by 27 per cent annually to Rs 18.68 trillion in FY 2024, as per the central bank, it’s clear that credit is becoming an integral part of consumer spending and Indian household finances. As we enter the festive season, typically a time of higher expenses, it’s more important than ever to manage credit card debt wisely,” says Amit Prakash Singh, co-founder & Chief Business Officer of Urban Money.

This rise indicates rapidly growing purchases on credit cards, especially during festive seasons when consumer spending peaks. Over the last five years, the spending on credit cards has consistently risen, from ₹7.3 trillion in FY 2020 to ₹18.30 trillion in FY 2024. This five-year rising trend highlights a shift towards cashless transactions. It indicated the consumer’s increasing confidence in using credit for their expenditures.

Credit Card Spending Trends Over the Years

Here are the credit card spending trends from FY 2020 to FY 2024:

Spendings During Festive Season

During the festive season, consumers tend to spend more than at other times of the year. This leads to a surge in credit card usage. In July 2024 alone, credit card spending rose by 19%, amounting to ₹1.7 trillion.  With offers and discounts from retailers and banks, many consumers turn to credit cards to manage their expenses. Leading banks and financial institutions offer cashbacks and reward points on credit card purchases to attract consumers. It often leads to a credit card debt trap.

Credit Card Usage Statistics

By July 2024, major banks reported significant activity, with HDFC Bank leading the way with 9.9 crores transactions. ICICI Bank followed closely with 7.1 crore transactions, while SBI recorded 6.3 crore transactions during the same period.

Regarding transaction value, HDFC Bank topped the list with ₹44,369 crores, ICICI Bank at ₹34,566 crores, and SBI with ₹26,878 crores. This shows the growth in credit card usage and increased digital payments, especially in e-commerce. The total value of e-commerce payments via credit cards increased from ₹95,000 crores to ₹1.05 trillion by February 2024.

Understanding the Credit Card Debt

Credit card usage increases the risk of accumulating debt, particularly during high-spending seasons like the festive period. Managing credit card debt is important, as interest rates can range from 24% to 28%. Any missed payment can lead to financial strain. Many consumers find themselves in a cycle of debt. This happens mostly when using credit cards for holiday shopping or unexpected expenses. It’s important to understand the implications of the debt and use credit cards with caution.

Strategies to Manage Credit Card Debts

Here are some of the strategies you can try to manage your credit card spending and debt:

• Make a Budget and Stick To It: Consider making a detailed budget for your credit card spending. First, pay off your EMIs, utility bills, and other necessary repayments. Then, finalise the spending plan based on the amount left with you. In simpler terms, plan your repayments first, then continue with the spending.
• Debt Consolidation: It is one of the most popular approaches for credit card debt management. You can take a new loan to pay off your other debts. This solution is often used to reduce the multiple repayments.
• Balance Transfer: You can transfer your credit card debt to another bank that is offering lower interest rates. This way, you’ll have to pay fewer EMIs with the new interest rates.
• Personal Loan: If a personal loan with lower interest rates is available, you can opt for it instead of a credit card.