ATM withdrawals account for Rs 65,000 crore as against Rs 45,000 crore swiped away on credit cards.

Shobha Kannan

Mumbai, July 8 While plastic cards can open the doors of any commercial establishment, there are still many who prefer thick wads of currency on their person. The amount of cash people flush out of ATMs (automated teller machines) is 44.4 per cent more than what is spent on credit cards.

A recent industry survey shows that ATM withdrawals account for Rs 65,000 crore as against Rs 45,000 crore swiped away on credit cards. However, purchases on debit cards were only Rs 12,000 crore, despite debit cards far outnumbering credit cards.

The number of debit cards in circulation is close to 60 million and credit cards only 26 million, says Mr Saurabh Tripathi, Partner & Director, The Boston Consulting Group. The total transaction on the cards as a whole during the year is said to be close to Rs 1,25,000 crore.

The general perception is to dismiss the spending on credit cards as due to the “credit limit” and “extra cushion” facilitated by revolving credit. Senior bankers point out that the debit card use hardly gets a fraction of the footage the credit cards get on the television.

Revenue spinner

They acknowledge that the credit card is a revenue spinner as it brings in interest and transaction charges. And, more importantly, they also build up a customer base of credit worthy clients for cross selling the numerous products that banks today have on their counters. Then, of course, the add-on sops for use of the credit cards such as rewards points and the special package offers that manufacturers and merchants vend across.

“You get a credit limit, which can be useful for high spends. There are interest- free periods on all cards, up to a maximum of 45 days that can be utilised by making payments on the due date,” says Mr Sachin Khandelwal, General Manager, Head-Cards Product Group, ICICI Bank Ltd.

Mr Aspy Engineer, Vice-President-Alternate Channels, Retail Banking Department, UTI Bank, attributes the high number of debit cards to the fact that every accountholder gets one. Mr Tripathi also feels that credit cards are more preferred due to the interest-free window it offers. “From a consumer’s perspective it is slightly better than a debit card as they get free money for a month or so,” he says, adding an added advantage is that there are no annual fees on credit cards.

Mr Vivek Vig, Country Head, Retail Bank, Centurion Bank of Punjab Ltd, says: “Electronic form of payment will help regulate cash economy and the need for financial transparency”.

(This article was published in the Business Line print edition dated July 9, 2007)
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