If there’s one segment of business, which has managed to defy the prolonged slowdown blues, well, it is that of credit cards! A news report indicates how average spend (on monthly basis) per card or user has increased more than 42 percent from Rs 4,462 a couple of years ago to to Rs 6,322.
Bank authorities attribute the impressive growth to primarily ‘EMI at POS’. It can be considered a sort of payment innovation that lets both retailers and of course manufacturers sell consumer durables and gadgets such as smartphones under flexible monthly installment plans without any apparent credit risk on their part or the buyer being burdened with interest cost.
It is obviously consumerism, which is propelling the size and volume of credit card transactions especially after the unveiling of equated monthly installments right at point of sale by original equipment manufacturers as well as merchants.
Manufacturers are clearly keen to target young people in particular known to have penchant for shopping albeit with a touch lower and irregular incomes. The former are doing so through suitable and customized EMI schemes so as to expand the user base, trying to clear inventories as well, more so for expensive products like smartphones and cameras.
While electronic item and gadget manufacturers are open to the idea of getting their money in installments, they do not possess the wherewithal for assessing credit worthiness or even recover dues. “In the case of easy monthly installments at POS, the manufacturer or merchant is to bear the interest burden. However, if any cardholder happens to defaults, the risk has to be borne by the company that has issued the credit card, informs an industry insider.
Customers have been offered by many card companies the option of converting a part of the major purchases into easy-to-pay loans that can be paid back in monthly installments spread over a few years according to their convenience. The response, however, has not been that enthusiastic as section of wary consumers in India is rather interest-averse. In fact, nearly 80 percent of them choose not to roll their bills instead repaying it by the month-end.
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