The credit card trap: How festive shopping spree can lead to debt

Credit card debt is the priciest, with interest rates ranging from 35 to 48 percent for late payments

Credit card transactions surged during India's festive season e-commerce boom, driven by extra discounts on card payments across platforms like Flipkart and Amazon, amid declining debit-card usage and slowing UPI growth.

According to a Moneycontrol analysis of transaction data, credit card spending on online platforms outpaced debit card usage nearly six-fold, indicating a significant shift towards credit-driven consumption.

Credit card payments on e-commerce platforms surged 26.8 percent in volume and 34.8 percent in value year-over-year, with daily spending reaching Rs 5,286 crore, up from Rs 3,922 crore in 2024. Debit-card transactions declined 22.6 percent in volume, continuing a multi-year downturn.

Credit cards provide benefits like convenience, instant discounts, cashbacks, and rewards, but reckless use can lead to financial trouble. If you've become a frequent credit card user this festive season, here's what you should keep in mind.

Credit cards are the most expensive forms of debt

Credit card debt is the priciest, with interest rates ranging from 35 to 48 percent per annum for late payments, far exceeding personal loans from 11 to 18 percent per annum and home loans from 7.3 to 9 percent per annum. Interest accrues on the full outstanding amount.

Typically, outstanding credit card amounts incur a monthly charge of around 3 to 3.75 percent, which translates to an annualized interest rate of approximately 36 to 45 percent. For instance, Flipkart SBI Credit Card charges interest at 3.75 percent per month, which translates to 45 percent annually.

Layoffs and credit card woes: How to stay financially secure

With widespread job losses in recent years, many of us are left wondering about our own job security. For example, Accenture recently cut over 11,000 jobs globally in a major restructuring effort. Similarly, Tata Consultancy Services (TCS) CEO K Krithivasan told Moneycontrol in July, 2025 that India’s largest IT services firm would cut 2 percent of its workforce-over 12,000 jobs.

In uncertain times, credit cards can be hazardous for those who struggle with overspending. Credit cards entice shoppers with rewards, cashbacks, and discounts. “To avoid overspending, track unbilled balances and limit spending to amounts that can be repaid by the due date,” said Harshil Morjaria, a certified financial planner at ValueCurve Financial Services.

The credit card trap: Paying minimum due can cost you years

Credit card users often struggle to control their spending, resulting in large outstanding balances on their monthly statements, which can lead to a cycle of revolving credit and partial payments.

“If a credit card holder owes Rs 50,000 and only pays the minimum amount due each month, it would take nearly nine years to pay off the debt,” said Morjaria.

To avoid debt traps, it's best not to revolve credit card debt by paying only the minimum amount due, as this can lead to a long-term financial burden.

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Credit score gets affected due to a higher utilisation ratio

Are you regularly maxing out your credit card? Monitor your credit utilization ratio (spending vs. limit), as a high ratio can lower your credit score.

According to Adhil Shetty, CEO of Bankbazaar, it's best to keep credit utilization below 40 percent. For example, with a Rs 1 lakh credit limit, aim to spend no more than Rs 40,000.

If you regularly exceed 40 percent of your credit limit, consider requesting a credit limit increase from your card issuer, if eligible. This can lower your credit utilization ratio by boosting your total credit limit.