Why India Has Low Credit Card Penetration Despite Rising Usage: TransUnion CIBIL Explains

Despite the wide popularity of credit cards, a recent TransUnion CIBIL report has revealed that credit card penetration in India is lower than in other developing countries. The report found that India has 5.2 crore credit cardholders, accounting for only 25 per cent of the overall credit-active population of about 25 crores, which means only one in five credit-active borrowers owns a credit card.

Compared to India, the credit card penetration stands at 62 per cent in Columbia, 98 per cent in Hong Kong, 81 per cent in the United States of America, and 70 per cent in the United Kingdom, as per a white paper prepared by the credit information company. Across developed nations, such as Canada, the USA, the UK, and Hong Kong, about 60 to 90 per cent of credit-active customers own credit cards.

Despite the low penetration, the last decade has witnessed growth in credit card usage in India. Outstanding balances have increased 8.3 times to Rs 3.1 trillion, the number of people who own at least one credit card has grown 3.6 times to 52 million, and the total number of credit card users has grown 5.1 times to 107 million.

Reasons For Low Credit Card Penetration In India

The paper has highlighted several factors that might have caused low credit card penetration in India.

Owning Multiple Credit Cards

In the beginning, people only owned a single credit card. Gradually, the norm changed to owning multiple credit cards for various purposes, such as shopping, travelling, and staying at hotels. However, the issue is that over one in five cardholders currently own at least three credit cards, compared to one in eight decades ago. This shows that financial institutions are issuing additional credit cards to their existing customers who already have a good credit history, rather than bringing millions of first-time users into the system.

UPI Dominance

In most of the countries, credit cards are the default payment method. However, in India, due to various widespread government initiatives, UPI has emerged as a popular payment tool. In addition to that, only RuPay credit cards can currently be linked to a UPI, whereas Visa and Mastercard users don't get the same convenience, which further reduces the appeal of using credit cards.

Popularity of Small Personal Loans

Earlier, people depended on credit cards for consumption loans or short-term borrowing. However, the increasing popularity and easy availability of small-ticket personal loans of up to Rs 50,000 have caused a decline in the share of open credit cards in India's overall unsecured credit products to 38 per cent in 2026 from 56 per cent in 2016.

GenZ Borrowing Habits

Getting a credit card was considered a first step into the formal credit system. But as the times have changed and the availability of other credit products has increased, the younger generation is entering the credit system with two or more credit products even before getting their first credit card.

"Many new cardholders are still early in their formal credit journey, but a growing share is entering the card market with prior credit experience and with other credit products already present in the wallet. This is especially visible among Gen Z consumers, who are adding products sooner and showing stronger engagement with their first card issuer," said TransUnion CIBIL CEO Bhavesh Jain.