With prices of almost all types of essential commodities increasing drastically, spending has also increased among people in the country who use credit cards.
This in turn is pushing many middle and lower-middle-class segments of the demographic towards credit card debt, according to experts and industry insiders.
According to Bangladesh Bank data, credit card transactions have increased by about 39% in the span of just a year.
In May 2021, credit card transactions amounted to Tk1,704 crore, which significantly increased to Tk2,371 crore in May this year, an increase of 38.82% in a year.
However, the number of credit cards increased by only 10% during this period.
According to the Bangladesh Bureau of Statistics (BBS), inflation in the country is now on an upward trend.
Last May, the overall inflation was 7.42%.
Meanwhile, the trend of people borrowing on credit cards has increased since March, when the amount of credit card transactions exceeded Tk2,500 crore for the first time in the history of the country, with credit card debt rising to a record high in April.
In April, credit card transactions amounted to Tk2,715 crore, which stood at Tk2,371 crore in May.
As per both economists and bankers, credit card transactions increased for several reasons.
They believe that the rise in commodity prices had a big impact on the increase in credit card transactions apart from Eid-centric shopping, which also played a big role in the increase in credit card transactions during April-May.
According to experts, the prices of all types of goods have gone up this year in contrast to last year and people now have to spend more money on buying similar products than the year before.
According to Khondaker Golam Moazzem, research director at the Centre for Policy Dialogue (CPD), reliance on online transactions increased in the last few years due to the Covid-19 pandemic.
Again, the prices of all kinds of commodities have gone up in recent times and people have to spend more money to buy the same product due to inflation, which is also one of the reasons for the increase in credit card transactions, he also said.
Why an increase in spending
The use of credit cards is increasing day by day among the people, as there are instalment benefits in credit card shopping and various types of discounts. Another major reason for the increase in credit card transactions is the availability of interest-free loans for a certain period of time, Syed Mohammad Kamal, country manager of MasterCard Bangladesh, told Dhaka Tribune.
Credit card purchases usually provide interest-free loans for up to a certain period of time. Apart from this, in the case of buying different types of products including electronic goods, there is the facility of paying in instalments.
There are also various discounts available on credit card transactions when travelling abroad or travelling within the country. That's why people use credit cards to reduce costs or take advantage of various discounts in the face of rising inflation, Kamal also said.
In addition, credit cards have the facility to repay the loan up to a certain period of time.
Besides, there are various discounts including the purchase of goods in instalments.
On top of that, the number of international travellers taking foreign trips had also increased this year as compared to last year, which might have also increased the amount of credit card transactions, experts and insiders said.
However, in the budget announced on June 9, the filing of income tax returns has been made mandatory for accepting credit cards.
This means that from now on, people will not only have to have a tax identification number or TIN to get a credit card, but they will also have to submit a certificate of return submission.
This could have a negative impact on the credit card segment of the finance sector, a top private banker told Dhaka Tribune.
According to Bangladesh Bank data, the number of credit cards has increased to about 19,41,162 at the end of May. In April, this number was 19,22,263.
The number of credit cards has increased by about 19,000 in one month.
Compared to May last year, credit card transactions increased by 39% in May this year, but debit card transactions increased by only 16% during this period.
In May last year, the total debit card transactions was Tk22,452 crore, which increased to Tk26,051 crore this May.
It shows that in terms of percentage, the growth of credit card transactions is more than double that of debit cards.
