Credit cards, once hailed as a convenient financial tool, are now ensnaring many young individuals like 25-year-old in a cycle of debt and financial distress. What begins as aspirations of owning electronics swiftly devolves into a nightmare of mounting debts and struggles to make ends meet.
Rising Credit Card Adoption: Bharat has witnessed a remarkable surge in credit card adoption in recent years. Just a decade ago, credit cards were rare due to stringent eligibility criteria. However, by January 2024, the number of active credit cards had nearly doubled to almost 10 crore, signifying an 81% increase. This boom has been fueled by factors like the emergence of e-commerce and changes in the credit card value proposition.
Escalating Credit Card Spending: Simultaneously, credit card spending in Bharat has skyrocketed, reaching unprecedented levels. In May 2022, overall credit card spending peaked at Rs 1.3 lakh crore, further surging to Rs 1.72 lakh crore by October 2023. This spending frenzy has been partly attributed to post-Covid economic recovery and the allure of rewards and cashbacks offered by credit card companies.
Rising Defaults and Financial Distress: With increased credit card adoption and spending, defaults have also surged. In 2022-23, credit card defaults stood at Rs 4,072 crore, marking a significant rise from previous years. The Reserve Bank of India (RBI) has expressed concerns over this trend, particularly as banks extend credit to riskier borrowers, exacerbating the debt crisis.
Minimum Due Trap and Personal Loans: Many individuals, find themselves trapped in a cycle of paying only the minimum due on their credit cards, leading to a spiraling debt burden. Some resort to extreme measures like taking out personal loans to clear their credit card dues, only to find themselves caught in another cycle of debt due to the higher interest rates associated with personal loans.
As Bharat grapples with the consequences of its burgeoning credit card culture, stories like 25 year old person, serve as cautionary tales. While credit cards offer convenience and purchasing power, they also pose significant risks, leading many down a path of financial distress and debt. As the country continues to witness a surge in credit card adoption, it becomes increasingly crucial for individuals to exercise caution and financial responsibility when utilizing this financial tool.
Comments