Evolution of Credit Card in India: A Journey

In August, the Reserve Bank of India reported that the transaction amount through cards had reached a record high of Rs.1.48 trillion, up from the previous month's Rs.1.45 trillion. This implies that credit cards have seamlessly integrated into our lives, providing a streamlined means to conduct transactions both online and offline. Read on to learn the historical trajectory and technological advancements of credit cards in India. 

Tracing the Modern Credit Card History 

The roots of credit can be traced back to ancient civilizations, where merchants relied on trust to extend credit to their customers. However, a precursor to modern credit cards emerged in the 1920s when department stores and gas stations began providing customers with metal charge plates or coins. These innovative instruments helped individuals to make purchases on credit, deferring payment to a later date. 

This evolution continued in the 1930s and 1940s when the "Charga-Plate," a small metal card embossed with the customer's name, address, and account number, was introduced. Issued by select retailers, the Charga-Plate operated within a closed-loop system, restricting its use to specific establishments. 

A breakthrough occurred in 1958 when Bank of America introduced the Bank America Card, now known as Visa, in Fresno, California. This marked the entry of banks into the credit card world, offering consumers the first general-purpose credit card. 

Simultaneously, American Express launched its inaugural charge card in 1958, rapidly gaining popularity among travellers and businesses due to its prestige and global acceptance. Concurrently, other banks entered the scene, issuing their credit cards and forming partnerships with merchants. 

Also Read: Credit Card Future in India: What's in Store? 

History of Use of Credit Cards in India 

The journey of credit cards in India has been fascinating, marked by initial scepticism, gradual acceptance, and finally, explosive growth. Let's dive into the key phases of this transformation: 

The Introduction of Credit Cards in India 

The introduction of credit cards in India in 1961 with the Diners Club Card by Kali Mody marked a transformative period in the economy. Initially perceived as exclusive tools for affluent or frequent travellers, credit cards faced limited adoption due to stringent eligibility and infrastructure constraints. 

The evolution of credit cards began in the late 1980s when public sector banks like the Central Bank of India embraced the trend of promoting Visa cards. Vijaya Bank, in a strategic move, countered Visa's dominance by introducing Mastercard in 1988. This period coincided with India's economic liberalisation, fostering a growing middle class with increased disposable incomes. 

The Initial Pushback 

Unlike debit cards, credit cards faced initial reluctance from Indian citizens who perceived them as risky liabilities. This shift in transaction norms and the negative connotation associated with the term 'credit' stood as a roadblock in its acceptance. In its early years, the anti-credit mindset prevailed, with people hesitating due to its perceived high liability and social consequences of payment delays. 

However, the appeal of its "spend now, pay later" feature eventually overcame these hurdles. The credit card market started in India in 1981 with Visa-issued cards but slowly transitioned to digital currency due to its widespread acceptance. 

Acceptance of Credit Cards 

The acceptance of the best premium credit card in India is on the rise, fuelled by increased benefits and growing financial literacy, especially among the youth. In June 2022, there were over 6.78 Lakh ATM transactions and approximately 12.1 Crore POS transactions.  

Predictions indicate a continuous rise, with an estimated 45.3 million cards in use by 2028. There is a diverse range of issuers, including NBFCs and fintech start-ups, offering tailored EMI options and contributing to the surge in credit card popularity. 

Also Read - How to Rectify CIBIL Report Mistakes? 

To Conclude 

From a solitary card in 1961 to a vibrant ecosystem today, the evolution of credit cards in India reflects this nation's own economic journey. As we move forward, embracing responsible credit and harnessing the power of technology, this plastic revolution promises to unlock even greater opportunities for financial inclusion and economic growth.  

If you are looking to consolidate your credit card debt, look no further than Poonawala Fincorp Personal Loan.  

Frequently Asked Questions 

• Who started credit cards in India? 

In 1961, Kali Mody became the first Indian entrepreneur to launch the Diners Club credit card in India, pioneering a new era of cashless transactions in this country. 

• What are the 4 steps of credit card processing? 

There are four steps of credit card processing. First, select a credit card merchant. Next, understand all the charges and fees associated with the card. Third, check out the rates on different types of transactions and other facilities of the card. Finally, fill out the application form to apply for the card. 

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