India's top spenders getting smart about credit usage

Credit card spends across other segments such as travel, banking and finance as well as digital payments have started increasing compared to lockdown and post-lockdown phase. This shows that sentiment towards spending is cautious still and showed a greater move towards plastic which will only improve in the year ahead.

By analysing credit card spending behaviour in 2020 of India's most creditworthy people, CRED analysed credit card spending behaviour in 2020 of India's most creditworthy people has found that the caution exercised during the days of lockdown transformed selectively into exuberance during the festive season and has stayed there since. There were some fundamental, long-term shifts in how Indians manage their money - by becoming more agile and careful, and increasing digital's share of wallet, letting them pursue indulgences of choice more boldly, while still remaining cautious about spending in general.

Credit card spends across other segments such as travel, banking and finance as well as digital payments have started increasing compared to lockdown and post-lockdown phase. This shows that sentiment towards spending is cautious still and showed a greater move towards plastic which will only improve in the year ahead.

To survive the lockdown and during these dreary work from home days, many have indulged in at-home experiences and retail therapy to overcome their blues. This is evident from shopping and food seeing the highest credit card spends through the year and recovering to more than pre-Covid-19 levels at the end of 2020.

l Shopping and food incurred maximum indulgence with the most credit card spends by members averaging almost 36 per cent of total credit card expenditure throughout the year.

l During the pre-lockdown phase, members used 35 per cent of their plastic money to buy items that they've been eyeing for a while or exploring various cuisines from the comforts of their homes. This rose to 41 per cent during the festive season to ring in new beginnings.

l Members in Chennai have spent 40.25 per cent on shopping and food during the year, Bangalore is a close second with 39 per cent spends, while Hyderabad is the city with the least spends on this category at 32.75 per cent. Other cities including Kolkata, Mumbai, Delhi and Pune have spent 34.25 per cent, 34.25 per cent, 33.25 per cent and 36.25 per cent, respectively.

l On average, the month of October 2020 saw the highest spends on food and shopping with 48 per cent of total card spends across cities.

With digitisation taking over our lives, finance provisions ensure that there is enough for a 'rainy day' and credit cards are used to make their banking and finance payments. The pandemic disrupted payment cycles has ensured post-lockdown timely payments are back. People are back to making timely payments and demonstrating responsible financial behavior.

l EMIs, which comprised less than three per cent of credit card spends across cities in 2019, rose to eight per cent among members in Ahmedabad and seven per cent in NCR. The contribution of EMI to credit card spends rose in all cities except in Kolkata.

l The first half of 2020 was dominated by banking and finance (35 per cent) having the most spends; while the second half was dominated by shopping and food (40 per cent). Clearly, the mood shifted from securing to indulging cautiously!

l Spends show that there has been an increase of three per cent of utility bills being paid on their credit cards from the pre-lockdown phase (4 per cent) to the lockdown phase (seven per cent).

l An increase of three per cent in digital wallet payments has been observed from pre-lockdown (18 per cent) to lockdown (21 per cent).

l Travel dipped by 9 per cent from the pre-lockdown (15 per cent) phase to lockdown (6 per cent), making it the only category with the highest decline in spends.

l That being said, travel has increased by 2 per cent from lockdown (6 per cent) to post-lockdown (8 per cent), and further by 1 per cent from post-lockdown to the festive season (9 per cent).

l People are indulging but not splurging without thought. Unnecessary expenditure has remained constant.

l Bangalore and Chennai are the only two cities that have recorded higher spends with 4 per cent on health and wellness, and 3 per cent on infotainment by raking up online courses or subscribing to OTT platforms.

l For members in Ahmedabad, health and wellness and infotainment are not categories they spend on. The city records the least spends, across India, with 2.25 per cent on health and wellness and 2.75 per cent on infotainment.

l Automobile and fuel spends reduced sharply with pre-lockdown spends constituting 15 per cent compared to festive season spends accounting for only 9 per cent.