Consumers prefer debit cards in slowdown

The number of debit card transactions increased by 48 per cent in financial year 2009, compared to an increase of 12.7 per cent for credit cards. Similarly, debit card volumes grew by 44.6 per cent, whereas credit cards saw a volume growth of 13.7 per cent for the same period, says the Reserve Bank of India's data.

Sector experts attribute this surge in debit card usage to the ongoing economic slowdown and the cautious attitude towards spending money. Add to this the diminished focus of banks in issuing credit cards.

The pattern is starker in a quarter-on-quarter analysis by Venture Infotek, a transaction management company. Debit card transactions showed an increase of 88.6 per cent, against a rise of 34.5 per cent for credit cards for the March. In value terms, daily transactions through debit cards increased by 73.4 per cent vis-a-vis an increase of 24.8 per cent in credit card transactions.

"This shows the Indian consumer is behaving cautiously. Debit cards bring in the discipline of spending only the money you own. Besides, credit is scarce in a recession and credit card companies are vary of extending credit loosely," said Piyush Khaitan, Managing Director, Venture Infotek.

The total value and volume of point of sale transactions through credit cards in March has declined by 11.9 per cent and 3.9 per cent, respectively, over April 2008, says the RBI data.

It also shows the number of credit cards in circulation has declined from 28.3 million cards in April 2008 to 24.6 million cards in March 2009. Debit cards have registered an increase of 30.9 per cent to touch 137.4 million in March 2009.