Why credit card use is low in India

India has become a global leader in digital payments.

But when it comes to credit cards, the country is still lagging behind. Only 25% of India's credit-active consumers own a credit card, compared with 81% in the US and 70% in the UK. That's despite India having over 119 million active credit cards in circulation.

So, what's stopping Indians from using credit cards?

The biggest reason is something most of us use every single day, UPI.

In many countries, credit cards became the default way to pay for everything from groceries to restaurant bills. India took a different route. UPI made digital payments instant, free and widely accepted, allowing millions of people to go cashless without ever needing a credit card.

That has changed the way Indians think about payments. For most people, scanning a QR code is easier than carrying a wallet full of cards.

Banks have also become more cautious. Since credit cards are unsecured loans, they are usually issued to customers with stable incomes and a good repayment history. That leaves millions of first-time borrowers and informal workers outside the credit card ecosystem.

Even so, the market continues to grow. Credit card ownership has increased 3.6 times over the past decade, while outstanding balances have crossed ₹3.1 lakh crore. Interestingly, Gen Z now accounts for nearly half of all first-time credit card users, and adoption is gradually spreading beyond metro cities into semi-urban and rural India.

There's another interesting trend. While the number of cards has grown rapidly, the number of cardholders hasn't kept pace. Many existing users now own two or three cards, as banks focus on increasing spending among current customers instead of acquiring new ones.

That said, credit cards aren't just competing with cash anymore. They're competing with UPI, Buy Now Pay Later services and instant personal loans.

So while India's credit card market still has enormous room to grow, its future won't be defined by replacing cash, it will depend on proving that credit cards offer something India's payment ecosystem doesn't already provide.