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Why Indians prefer debit cards

Indians have been culturally conservative about excessive spending, the mindset is that one should spend within one's means

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India is a debit-friendly market, seen by the wide acceptance of debit cards, prepaid cards and mobile wallets. In August 2018, there were 980 million debit cards, way more than the 41 million credit cards. There are a few reasons why debit cards are more widely accepted.

Every bank account automatically issues a debit card to the account holder. Many customers, especially those new to the digital payment ecosystem, do not want to handle multiple cards and prefer sticking to the one card that their bank issued to them, which of course is a debit card.

Indians have been culturally conservative about excessive spending, the mindset is that one should spend within one's means. This thinking comes in conflict with the perception that credit cards incentivise people to spend more than they can control.

Unlike debit cards that come complimentarily with one's bank account, one has to apply for a credit card. The card and its benefits will depend on factors like customer income level, creditworthiness, credit history, etc. Most people prefer to avoid the hassle associated with applying for a credit card.

Credit cards also come with a fear of penalty for late payments, defaults, bad credit score, etc, hence discouraging people from even opting for the instrument.

Credit cards come with a host of advantages, which if used wisely, can reap financial benefits for the user. They provide cash back schemes across categories like travel, entertainment, food, lifestyle, etc, as well as non-monetary benefits like VIP lounge access at airports and frequent flyer miles. Customers can plan their travel better and take advantage of such benefits. But for those who do not wish to get into the intricacies of how to go about availing these benefits, debit cards are simpler to understand and use.

The writer is business head, financial processing & licensing, at Worldline South Asia and Middle East

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