Why people in India still not prefer to use credit cards, best way to use credit cards and their importance

Last Updated on December 5, 2021 by Admin

Since past 15 years, banks and credit card companies are promoting use of credit cards rigorously in India while most of the people in India are still very reluctant to hold credit card and benefits of having credit card is denied yet most of the time when they are asked to apply for new credit card.

This is basically due to lack of awareness about how to use credit card in best way or people fear about cheating with them or they have related myths, mis-understandings or someone’s bad experience of having credit card in past. There may be many other reasons why most of the people in India do not prefer to hold or use credit card.

Why people in India still not prefer to use credit card

There may be so many reasons why people not like to use of credit cards, let’s discuss few practical reasons which we tried to understand from various persons while discussing on this topic with them:

  • Lack of education & awareness: We have seen that people are not well educated and aware about the use of credit cards. We can’t expect from un-educated or less educated persons to hold credit cards because banks or credit card companies do not prefer to give this privilege to lower income class as its require some credibility to get this benefit of credit limit. But it is noticed that even people who are graduate or post-graduates and earning enough money are not even aware of the importance, use and benefits of the credit cards. Most of the people say that it is used on petrol pumps for payment mode instead of cash payment.
  • Mind-set or habit to use own cash:  Many people have mindset that they don’t need any credit or credit card to buy things and pay bills while they have their own sufficient cash balance in their pockets. It is noted that people don’t want to buy things on credit, instead they prefer to go at ATM, withdraw cash and then buy things etc. only on cash basis. This is combo of mindset + habit not to use credit but to carry cash always in their wallets.  Till now use of cash is the most convenient way to do shopping for majority of population in India.
  • Lack of knowledge how to fully use credit card: This is very surprising that only few people know about the complete use of credit cards. Mostly people only use them at petrol pumps etc. They even hold them in their wallets but still reluctant to swipe them at departmental stores and other places. They hardly use them when they don’t have sufficient cash to make payments. Surprisingly, bank employees also don’t even use credit card in their day-to-day life.
  • Fear of mis-use, theft or loss: People are afraid of mis-use of their credit cards so they are not much confident to use the credit card all the time when they have to make day to day payments. Most of them do not carry their credit card in wallet with them when they are in market to buy or shopping things. They keep them in home at secured place to avoid theft, loss or mis-use of their credit card due to that they are not able to use credit limit of credit cards. People also fear that their credit card may be mis-used or their details may be stolen by using them at unknown places like hotels, restaurants, or other places where they hardly visit again in future so they don’t prefer to hand over or swipe their cards at those places. This fear is true to some extent when we hear or read fraud news like cloning of credit card and copy of CVV number and other confidential information from customer’s credit card and making huge loss by using those cards by scammers.
  • Increasing trends of credit card scams: Undoubtedlycredit card scams have increased over the period of time in India which led to low confidence of people in India to hold credit card. No one want to victim of credit card scam with them which turn to heavy financial loss to their pockets instead of giving much benefit of credit limit of 30-40 days available on credit cards. There are thousands of cases where people feel looted due to credit card frauds/scams happened with them in past and they always spread word in the air never use of credit card in future.
  • Feel of un-convenience and lack of support: Some people had used credit card in past but they discontinued later when we felt that it is not so convenient to carry & use credit card all the time. People say that they had to remember due dates of card payment and they were bound to cut cheque every month and drop the same to banks for timely payment of credit card. Reviving of credit card pins have become very challenging for them who forget or lost the secret PIN or blocked due to wrong use of pin because they couldn’t get support from customer care of concerned credit card bank or company to resolve their issues on time.  Not receiving credit card statement on time and resulting to delay in payments of card had become common issue for many card holders.
  • Heavy interest and late fee charges for delayed payments: 50% to 60% of people discontinue use of credit card just because they had been charged undue heavy interest and late payment charges without their fault. This is very harsh feature of any credit card that if you fail to pay any credit card payment for whatever reason then you will be liable to pay interest which may range from 30% to 45% p.a. which is too high + fixed late charges which may range from minimum 500/- to 1000/- depending upon what type of card is used.  People faced challenges like banks claimed that payment cheque was not processed on time due to bank holiday, error on cheque, signature mis-matched etc. etc. which tend to heavy charges imposed in next month credit card statements. So generally, people feel un-necessary harassment to them and they stop using credit card in future and they give advice to others to do so.
  • False promises by credit card executives: This is also one of the common reason for people not to use credit card. It is noticed that various banks hire credit card executives and give them target based remuneration and incentives. Some times those credit card executives give false promises to customers to achieve their own targets and they use un-ethical practices to convince the customers to apply the credit card to get benefits which are not exists at their backends. In many cases, customers were charged with heavy insurance charges etc. for security & safety of their credit cards. Their consents were taken by doing mis-leading calls by third party customer executives. People feel cheated later on and they usually cancel them or stop use of credit card. Such kind of bad experience also encouraged people to drop idea of having credit card.
  • Mobile Apps: Over the period of time in India various mobile apps come into existence specially after demonetization happened during November 2016. Mobile apps like PayTM, Google-Pay, PhonePe, MobiKwik etc. have dominated the earlier market place occupied by credit card companies and banks. People felt it very convenient to use those mobile apps by connecting them with their bank accounts instead of credit cards. Although many people still use credit cards to add  money to those mobile apps but most of the people avoid credit card and prefer direct linking of their bank account to those mobile apps and they don’t bother for any credit limit or credit period available on credit cards.

Myths about credit cards:

There are few myths about credit cards due to which people avoid use of credit card:

  1. Only rich people hold credit cards as their status symbol
  2. Owning credit card is another headache to manage money to pay them on time
  3. Credit cards are used by businessmen to get benefit of credit limit and credit period
  4. If you have money in pocket then no need to hold credit card
  5. Owning a credit card 💳 means overspending money on un-necessary things
  6. Use of credit card come under surveillance of Income Tax deptt.
  7. People who hold credit card are end up with their whole money robbed at later stage
  8. Friends and relatives may take undue advantage of using credit card for costly things while you go for outing with them

Importance of Credit card

  1. Credit card play very important role to improve CIBIL score which help to get loan from banks at better rate of interest
  2. Credit card provides free of cost i.e. interest free credit period ranging from 30 to 40 days
  3. Credit card is like a friend in need when you don’t have much money in your wallet then you can use it to make payments. You have no need to beg for money from any friend or relative etc.
  4. Banks normally provide hassle free personal loans and credit limits offers to their good customers time to time on the basis of credit card utilization. You can enjoy the cash liquidity at lower cost and prompt fund transfer to your bank accounts
  5. It helps to add money to various mobile/online wallets like Paytm, G-pay, MobilePe, MobiKwik etc.
  6. Credit card is mostly used for digital transactions on various websites and e-commerce stores to buy things specially on international channels etc.
  7. Credit card help you to track your monthly expenses through card statements and you can plan, manage and control your monthly expenses by doing little financial analysis of monthly spend on cards.

Best way to use credit card i.e. important things to follow while using credit card:

If you are new to credit cards, then it become very important that you maintain good credit history and using the credit card wisely to avoid any damage to your credit profile. Here are some smart tips to use the card and to ensure that you remain financially healthy:

  1. Always pay your credit card dues in full and on or before due dates. Put reminders on your mobile because every single late, missed or incomplete payment is reported by your bank to CIBIL/credit bureaus. This will give negative affect on your credit score in your CIBIL report.
  2. Do not prefer to pay minimum due payment and balance to next month which will involve paying high interest rate @30% to 40% p.a.
  3. Don’t buy things unnecessarily which you cannot afford, even though you have easy access to credit cards.
  4. Don’t use full credit limit on your card. The less you spend, the better it is for your credit score. It is recommended that only use less than 50% of your credit card limit.
  5. Don’t use credit card at an ATM for cash withdrawal unless you have some emergency otherwise you have to pay huge amount of interest on cash withdrawal transactions.
  6. Keep your credit card slips so you can check it against your monthly credit card statement. Any discrepancies or mistakes should be reported immediately to bank as they can be reversed.
  7. Keep your credit card details and your card issuer’s phone number with you in a safe place so you can immediately report any theft or misuse of your card.
  8. Read all the terms and conditions regarding usage of your credit card so that you are aware of all the interest charges, late fees, finance charges and other terms applicable on the card.
  9. Never share confidential information of your card with anybody including bank employees specially CVV number, PIN and mobile OTP at Whenever cost because sharing such data may lead to fraud with you.
  10. Whenever you swipe credit card at any petrol pump, store, shop, restaurant, hotel or any other place then be careful and not handover the card to any unknown person. Swiping of card must be done in your presence to avoid any data theft or cloning of your card.

We hope that this blog is useful to you. Thanks for your time.

You may also read: What is Credit Card? what is difference between Credit and Debit Card ?




Leave a Comment