Moneycontrol Pro Panorama | What does the rising tide of credit card spending tell us?

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Dear Reader,

Are you someone who spends a lot on credit cards? Well, as a matter of fact, most of us do.

India’s credit card spending reached a record Rs 2.17 lakh crore in September 2025. Buoyed by the festive season, GST cuts, and aggressive bank offers, it paints a rosy picture of consumer confidence. But to my mind, this boom may not be as sustainable as it seems. If India’s economy faces headwinds and the job market stagnates, this credit-driven growth could soon turn into a crisis of defaults.

Typically, the festive period in India brings a predictable surge in credit card usage, fuelled by massive discounts, cashback offers, and the irresistible lure of Diwali shopping. Add to that the recent GST cuts and the wave of promotions from banks like HDFC, SBI, and ICICI Bank, and it’s easy to see why consumers are swiping more than ever. For now, the numbers look impressive -- a 14 percent month-on-month rise in credit card spends, with major banks leading the charge. But this record-breaking number hides a bigger story.

So, what’s going on?

What we are witnessing is a growing culture of credit dependence. Consumers are increasingly using credit cards not just for big-ticket purchases but also for everyday spending. The number of credit cards in circulation has risen to 113.4 million, marking steady growth from the previous year. Effectively, this signals a shift in India’s payment behaviour — a shift that banks are all too eager to capitalise on, luring customers with offers that seem too good to resist.

However, therein lies the danger. Credit, as convenient as it is, comes with a ticking clock. The surge in card usage is largely being driven by the affluent urban middle class, whose disposable income allows them to indulge in discretionary spending. But what happens when the economy slows, when growth decelerates, and when the job market tightens?

It’s easy to overlook the fragility beneath this bubble. Over the past year, the Indian economy has shown signs of vulnerability. While the festive period has given a temporary boost to consumption, there are clear indicators that growth may not sustain at the current pace. The job market remains uncertain, especially with rising automation and global demand shifts. If businesses start downsizing or fail to create new opportunities, the already fragile household finances will come under pressure.

So, what’s the message here?

For the middle class -- many of whom are now using credit cards to fund lifestyles they can’t afford -- a downturn could quickly spiral into defaults. As debts rise and incomes stagnate, paying off credit card bills could become a struggle. Unlike loans, credit card dues are notoriously expensive. The punishing interest rates on unpaid balances can lead to a vicious cycle of debt, one that’s hard to escape.

Banks, of course, are aware of this risk. They have safeguards in place, but the rise in credit card defaults is already a growing concern globally, and India is no exception. As the number of cards in circulation continues to rise, the risk of slippages becomes even more significant.

The credit boom looks dazzling on the surface. But if jobs slow and incomes weaken, the hangover could be severe.  

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