Ms Suneeta Sharma couldn't resist the offer of an iPad that was to be given to the highest gold jewellery transaction through credit or debit card every hour at a retail shop in Mumbai.

“I persuaded my husband to buy a necklace worth Rs 30,000 using his credit card as they were offering iPads as gifts. We were not so lucky though,” she said. .

Banks seem to be cashing in on the craze for gold by promoting credit and debit cards with such offers such as iPads. The strategy is paying off as buyers are happy swiping plastic cards at jewellery outlets.

Mr Arun S. Kaigaonkar, Chairman, Chintamanis Jewellers, said that with the recent spurt in gold prices, customers preference to make payments through debit or credit cards has seen a quantum jump at his outlets in Mumbai.

“We have seen a 30 per cent rise. The trend was more pronounced during the festival season. Purchase of even 10 gm of gold jewellery involves a transaction of around Rs 30,000 and nobody wants to take the risk of carrying so much cash,” he said.

Mr L.K. Syed Ahmed, Chief Advisor of Tamil Nadu Jewellers Federation, agrees, saying that customers are willing to swipe cards despite a lengthier process. “If the transaction exceeds Rs 1 lakh, banks ask the customer to come on line,” he said. Mr Kunal Gothivarekar, Director (Sales), ICICI Merchant Services, said: “We see a clear shift of spending from cash to card according to the latest RBI data. Being the leading POS (Point of Sale) acquirer for jewellery merchants, we feel customers today prefer to purchase jewellery electronically.” Spend on jewellery through cards has gone up 64 per cent in the first seven months of this fiscal. In comparison, the growth in 2010-11 fiscal was 15 per cent, he said.

According to him, the major shift in card use for jewellery purchases is being witnessed in the South and East. Besides offers and promotions, the convenience of converting high value transactions into instalments has incentivised customers to draw the plastic cards from their wallets. Debit card comes handy for risk-averse shoppers, who prefer to draw from their own accounts for high value transactions.

Wasn't it a trend for customers to buy gold without receipts so that they can avoid paying local taxes? “By using credit cards, customers pay one per cent value-added tax. That one per cent is more than made good by the rise in gold prices,” said Mr Ahmed.

However, Mr G.R. Ananthapadmanabhan, Managing Director of G.R. Thanga Maligai in Chennai, has a different take. “Gold sales through debit and credit cards may have gone up proportionately. But it could be because of higher gold price. We are seeing the same customers using the plastic cards.”

According to the RBI data, in general the total credit and debit card use at points of sale was at Rs 88,000 crore between March 2010 and February 2011.

suresh@thehindu.co.in

rravikumar@thehindu.co.in

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