Will Credit Cards Revive Purchase Behaviour, once again?

Rohit Kumar Pandey
November 28, 2020

The pandemic has changed the way consumers purchase, probably forever.

While digital convenience may be the buzzword, a diminishing risk appetite and conscious spending are the new antecedents of purchase behavior. 

This implies that along with other financial products, credit card services may also have to skate on thin ice.

Ironically, customer experiences during times of crisis are the most remembered; when done right, brands can earn a special place in consumers’ hearts, and eventually, their minds.

Financial brands too. 

Changing Consumer Attitudes and the Credit Card

On October 1st, 2020, the RBI put into effect new services that banks must provide its mindful consumers. 

From international credit transaction opt-ins to spending limits on both credit and debit cards, these latest features arm consumers with new-found purchase control. 

In other words, banks are now obliged to usher in conscious spending, while continuing their pursuit to maximize everyday purchases using credit and debit services. 

While consumers paint the brighter picture for India’s economy after the pandemic, banks, not just in India, but worldwide, are tackling multiple challenges on all fronts.

Right next to meeting the digital transformation demand and improving community penetration, lies their unspoken concern: higher NPAs. 

Across the G20, legacy banks are reporting high NPAs, in fact, they could be the highest in 20 years. And this was even before the pandemic. 

However, won’t banks easily surpass this hurdle with their other strong revenue streams like credit cards?

While the recent credit card spike has been noted, and more customers have been upgrading to premium credit cards, the RBI has also expressed that this sunshine could be momentary.

This is because while consumers are being cushioned with the ex gratia moratorium and spending caps, their loyalty towards credit cards continues to be in flux.

To understand credit cardholder behavior, after the pandemic, on holiday season purchases, a survey was conducted across credit cardholders in the US. 

Let’s look at the results:

Intent to use credit cards in the US (2020)
Source: PYMNTS.com

Consequently, the total credit card balance across all issuers in the US is down to $723 billion, the lowest since 2017.

Prompted by unemployment, credit card holders have paid off $10 billion in outstanding dues in Q3 of 2020, causing a $76 billion drop from Q2 of 2020.

So will the pandemic dampen credit card usage in India, like how it seems to in the US?

This is a slippery (almost subconscious) logical fallacy that could hide the truth: consumers haven’t stopped spending; they’ve changed where they spend, how they spend, and also what they use to spend. 

Needs triumph Wants: Sustainability Overtakes Instant Gratification

While the jury’s undecided on forthcoming credit card usage, total household debt (including credit) is still on the rise; actually, it has risen slightly after the pandemic. 

Overall debt has risen by $87 billion from Q2 to $14.35 trillion in Q3. 

How come?

  • Mortgage debts have risen to $9.86 trillion 
  • Housing and refinancing loans are at their highest since 2000, slightly crossing $1 trillion 
  • Student loans have increased by $9 billion, reaching $1.55 trillion 


  • Total credit card balance was at a six-month low as of August 2020

It’s clear that the pandemic hasn’t stopped people from buying or using financial instruments; consumers are now forced to rethink how they will secure their future, with their financial decisions.

Don’t get me wrong; these large financial decisions do not negate the use of credit cards, rather they indicate the new motivations that drive consumer behavior. 

And it is these motivations that are repositioning every financial product in a new light. 

The Bigger Picture is the Only Picture

Almost every consumer brand rewards customers with cash backs, discounts, and exclusive offers. This is done by a brand to command customer loyalty. 

But is the exact vice-versa expected? 

Do consumers also expect a brand to be loyal to them?

How a brand cares for its customers is an unspoken determinant of customer loyalty. And the ongoing crises, emerging from the pandemic, are testing waters for brands, not consumers.

In the latest EY Future Consumer Index Report, only 17% of respondents will trust financial institutions in times of crisis.

Additionally, 44% of the respondents report that their purchasing decisions will be negatively impacted, if financial institutions are perceived to be maximizing profits.

With this as a backdrop, it isn’t surprising how the ex gratia moratorium took account holders by surprise and garnered cheers from credit card holders and borrowers alike. 

As consumers continue to prioritize their futures over instant gratification, financial institutions that reward their customers with meaningful, long-term benefits will build a richer relationship.

It’s now clearer more than ever: the financial institution that understands their customers, and joins them in building their future, will stand out from the rest, especially in times of crisis.

The pandemic is the ultimate test of customer loyalty. And when customers choose you, especially when they are on thin ice, there’s an opportunity to build relationships that can outlast any crisis.

But firstly, this pandemic.

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