Consumer Perception and Attitude Towards Credit Card Usage
Consumer Perception and Attitude Towards Credit Card Usage
Consumer Perception and Attitude Towards Credit Card Usage
Abstract
A notable change in consumer financial services over the past few decades has been the
growth of the use of credit cards, both for payments and as sources of revolving credit. In
modern business, credit cards (along with debit cards) serve as a payment device in lieu of cash
or cheques for millions of routine purchases as well as for many transactions (for example,
making retail purchases by telephone or over the Internet) that would otherwise be inconvenient,
or perhaps impossible. The credit cards have also become the primary source of unsecured openend revolving credit, and they have largely replaced the instalment-purchase plans that were
important to enhance the sales volume at many retail stores in earlier decades. Indian credit card
market has been changing rapidly as its doors are opened to the global economy. As profit
opportunities are more, major credit card brands have been entering the Indian market. At the
beginning, the usage of credit cards had been very limited. They were used mostly in upscale
hotels, restaurants, retail stores and in major urban centers. However, later significant changes
occurred in Indian credit card market. Credit card ownership and usage have expanded very
rapidly in India. In this backdrop, there is need to study the consumer perception and attitude
towards credit cardholders in Warangal district.
Introduction:
The term credit card usually refers to a plastic card assigned to a cardholder, with a
credit limit, that can be used to purchase goods and services on credit or obtain cash advances.
Credit cards allow cardholders to pay for purchases made over a period of time, and to carry a
balance from one billing cycle to the next. Credit card purchases normally become payable after
a free credit period, during which no interest or finance charge is imposed. Interest is charged on
the unpaid balance after the payment is due. Cardholders may pay the entire amount due and
save on the interest that would otherwise be charged. Alternatively, they have the option of
paying any amount, as long as it is higher than the minimum amount due, and carrying forward
the balance.
Evolution of Credit Cards in India:
Credit mode of financial transaction was used in India around 3000 years ago. In the late
14th century, the forerunners of bank notes, bill of exchanges were used to run with utmost
responsibility. Many financial related debts were settled down with one third of liquid cash and
two thirds of bill exchanges which perpetuated till the 17th century. In the 19th century, a few
people in India, used to sell clothes, which were offered on weekly payments and the record was
maintained on small sticks as they were called as Tallyman. The stick was maintained with
notches and then was season with the record of payments. In the year 1920, shoppers plate was
also issued as a credit to Indian clothe customers and it was called as buy now, pay later
service. As India, was on a breach of independence, many rich Indians used to utilise this service
as they found it as affordable sources.
Till the year 1970, credit card services were running in full swing in USA and slowly
gripped the Indian markets. Progress in the Indian civilization has brought the radical changes in
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the financial dealings and its related cultures as well. The trading sector was revolutionized and
the need for something best or better intrinsically useful was in urgent requirement.
Indian financial dealings were not satisfied with the cash and coins dealings, as it formed
only one way of paying. Slow development in banking sector has witnessed paper instructions
mode of payment namely cheques or drafts. Then came plastic cards which are termed as
electronic payments and these are termed as credit cards. The introduction of the first credit card
is claimed by Central Bank of India, in 1980, by name, 'CentralCard'. These Credit cards are
offered to users, with a limit of spending and the cardholders are asked to pay it back with some
interest on time.
In 1981, Andhra Bank also introduced credit card facility to their bank customers in a
wider scope, it being a dynamic entry of credit cards in Indian banking industry. These Credit
cards have certain meaning, while producing them a certain amount of goods, services, or supply
are offered. In simple terms, credit cards are those which are offered to customers in order to
procure unsecured personal loan, offered by a bank, to fetch in some services and goods. The
credit limit is always offered with a payment date which is around 45 days.
Need of the Study:
Credit cards have become an indispensable part of modern day existence and no wonder
the last few years saw a sea change in the attitudes of people opting for this plastic currency.
Indian consumers are generally cautious in purchasing on credit. They display credit-averse
behavior. The 'pay now' feature of debit card discourages dependency on credit. It also helps in
better financial planning and control of purchases by consumers. A credit card encourages the
customers to purchase now and pay later, which is still not inculcated in Indian culture. Indians
are still lacking behind the western countries in making use of credit cards. Hence, there is need
to study consumer perception and attitude towards credit cards usage in India.
Objective of the Study:
The main objective of the study is to examine the consumer perception and attitude
towards credit cardholders in Warangal district. It includes
1) To study the usage level of credit cardholders in Warangal District,
2) To assess the attitude towards credit cardholders in Warangal District and
3) To examine the perceptions of credit cardholders in Warangal district.
Scope of the study:
The present study makes an attempt to assess the perceptions and attitude of cardholders
towards credit cards in Warangal District. Its scope has been confined to 250 credit cardholders
from Warangal district. The study also attempts to measure the Demographic and SocioEconomic Characteristics, Usage and Debt Payment Preference of credit cardholders in
Warangal District.
Source of Data and Methodology:
The study is based on Primary data. The primary data is collected by using questionnaire
technique. A well-designed questionnaire comprising scaling technique like Likert Model i.e.
five point scales have been used to collect the perception towards credit cardholders. The data
collected is analysed and interpreted by using statistical techniques such as averages, Chi-square
Test and Factor Analysis techniques are used. The data collected for the present study that the
features and benefits of credit cards issued by many banks are almost similar. In this regard, it is
decided to analyse credit cardholders opinions individually. The sample (Convenience Sampling
4
Method) size taken for the study is 250 credit cardholders from (Table 01: Selection of
Sample) Warangal distract.
Data Analysis:
To describe the Warangal consumer perception towards credit cards, descriptive research
was used. Due to the descriptive nature of this research, descriptive statistics of SPSS 16.0 for
Windows was used to find the answers of the research questions.
Demographic and Socio-Economic Characteristics:
Table 02 summaries the demographic and socio-economic characteristics of 250
respondents. An analysis of the socioeconomic characteristics of the respondents revealed that
males comprised 95 percent of the sample population. Of the total survey respondents, 55
percentages of the respondents are graduates, 25 percentages are below graduates and remaining
20 percentages are post graduates. Moreover, 77 percentage cardholders lie in the age group of
21-40 years. Around 21 percentages are in the age group of 41-60 years. The remaining 2
percentage are above 61 years.
in tier II towns and cities, and is increasingly accepted in place of cash. In this backdrop, the
holding period of credit cards by the respondent was elicited through questionnaire. The relevant
data are presented in table 03. It can be seen from above data that 28% respondents have been
using credit card from 2 to 3 years, 27% are more than 4 years and 25% are from the 1 to 2 years.
Around 14% are 3 to 4 years and the remaining 6% less than 1 year. It is clear from the above
analysis that majority of the respondents are using their credit cards from 1 to 3 years because of
popularity of these cards in the present day situation.
Volume of expenditures that were made by using credit card constituted the significant
share of usage and attitude of the respondents. It plays a vital role in the purchase and
consumption behavior. Hence, the average annual expenditure of respondents are elicited and
shown in table 04. The data displays that, the proportion of expenditures that were made by
credit cards to average annual total expenditures. 64% of the respondents stated that up to 30 %
of their average annual expenditures are met by using credit cards. Around 23% of the
respondents declared that their credit card expenses constituted 31- 50% of their total expenses.
The reaming 13% of the respondents expressed that more than 51% of their expenditure is
cleared through credit cards. Above analysis indicates that the majority of the respondents were
using their credit cards for meeting up 30% of their expenditure due to the lack of sufficient
number of merchant outlets and high transaction cost.
Further, a cross analysis is made between average annual income of the respondents and
their average annual expenditure through credit card. The relevant data are presented in table 05.
The data reveals that the respondents with below `2, 50,000, 52% of the respondents stated that
up to 30% of their average annual expenditures was paid by using credit cards. Around 27%
respondents stated that 31- 50% and the remaining 21% opined that more than 51% of their
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expenditure is met through credit cards. In the ` 2, 50,001 ` 5, 00,000 income group, 69%
respondents are using credit card in paying up to 30% of their average annual expenditures.
Further, around 20% are using these cards to pay 31-50% and the remaining 11% to pay more
than 51% of their expenditure. Out of the above `5, 00,001 income group, 53% respondents are
stated that up to 30 % of their average annual expenditure paid by using credit cards. 26% of
them to met 31-50% of their total expenditure and the remaining 21% for clearing more than
51% of their expenditure. Therefore, it can be concluded that most of the respondents belonging
to different income groups are using their credit cards for clearing up to 30% of their total
expenditure. Generally, most of the consumers are not possessing expected level of awareness
in utilising the credit cards to avail the different services offered by banks.
Chi-square Test: Further, an attempt is also made to test whether there is any significant
difference between average annual income and expenditure paid through credit cards.
Null Hypothesis (Ho): There is no significant difference among the respondents
belonging to different average annual income with regard to their expenditure were paid by using
credit card.
Test
Calculated Value
Table Value
Degree of
Freedom
Result
Chi Square
7.939049314
9.49
Accepted (Ho)
The calculated value is less than the table value. Hence, the null hypothesis is accepted it
indicates that there is no significant difference among the respondents belonging to average
annual income with regard to their average annual expenditure.
initial factor matrix to attain simple structure of data. The variance rotation is one of such
methods employed to obtain better result for interpretation.
The results given in table 10 depicts that four statements are contributing maximum
percentage variance. The Eight statements viz., Interest rates charged on credit card are
reasonable, Credit cards are used anytime at most of the places, Acceptability procedure at retail
outlets is easy, Free insurance coverage makes card attractive, Added benefits in the form of
discounts make the purchase decision on credit card easier, Purchase of air ticket often provides
travel insurance, Are you satisfied with services provided by the credit card companies and
Credit cards annual fees are reasonable grouped to gather as Factor - I which title as
Supplementary Services and account for 31.447% of the total variance of statements. The two
statements Credit card allows purchases before funds are actually available and Credit cards
provide revolving credit facility as Factor-II it titled as Core Services and account for 11.616%
of the total variance of statements. The statements Owning a credit card is a form of status
symbol, There is regular delivery of bill statements and They offer protection against
loss/damage of purchased goods a constituted as Supporting Services grouped together as
Factor III and account for 8.960% of the total variance. They tempted to overspend when they
have credit card statements titled as Other Services as Factor IV and account for 7.899%.
Therefore, it can be concluded that the majority of the respondents are strongly agree with
Supplementary Services provided by the card issuers in the study area. These services are
motivating the credit cardholders to make use of such cards very frequently to satisfy their needs.
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Conclusion:
It is observed that most of consumers are using their credit cards from 1 to 3 years
because of popularity of these cards in the present day situation and the different income groups
are using their credit cards for clearing up to 30% of their total expenditure. Generally, most of
the consumers are not possessing expected level of awareness in utilising the credit cards to
avail the different services offered by banks. These are preferred to clear the total debt arising
out of usage of credit cards for the specific billing period to avoid the high interest, financial
charges and Annual Percentage Rate (APR).
It can be seen from the research that the respondents prefer ATMs and Net-Banking
payment options in order to pay credit card debt. The reason is that it is convenient for the
cardholders to make payment through the above modes and to avoid pay specific visits to banks.
Most of the respondents are strongly agree with Supplementary Services provided by the card
issuers in the study area. These services are motivating the credit cardholders to make use of
such cards very frequently to satisfy their needs.
Implication:
Though the study was restricted to Warangal city, some important revelations have
emerged out of the studies that are useful to credit card marketers. The affluent consumers and
those above 40 years are not using credit card as a major some of payment method. The credit
card companies should think seriously about this and design strategies to include them as
customers as their purchasing power is very huge.
In the same regard, companies should also try to increase the volume of credit card
expenditure by including more Point of Purchase (POPs) into their network coverage. The future
potential of the credit card industry is immense as Indians are slowly digitalizing their financial
transactions. It also requires suitable marketing strategies from the credit card companies to tap
their growing market.
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No. of Respondents
102
60
50
28
06
04
250
Respondents
Percentage
238
12
250
95
05
100
192
42
06
250
77
21
02
100
62
138
50
250
25
55
20
100
32
126
46
02
30
14
250
13
50
18
01
12
06
100
212
34
4
250
85
13
2
100
Gender-wise Distribution
Male
Female
Total
Age-wise Distribution
21 40
41 60
Above 61
Total
Level of Education
Below Graduation
Graduation
Above Graduation
Total
Occupation Profile
Government Employee
Private Employee
Semi-Govt. Employee
Business
Professional
Retired Employee
Total
Average Annual Income
Below ` 2,50,000
` 2,50,001 ` 5,00,000
Above `5,00,001
Total
Source: Primary Data.
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Table 03:
Have Been Using Credit Cards by Respondents
Have Been Using
Respondents
14
62
70
36
68
250
6
25
28
14
27
100
Table 04:
Expenditure through Credit Cards by Respondents
Expenditure
Respondents
Up to 30%
31% to 50%
More than 51%
Total
160
58
32
250
%
64
23
13
100
Table 05
Average Annual Income Vs Expenditure through Credit Cards
Income Level
Total
Below ` 2,50,000
34
(52%)
18
(27%)
14
(21%)
66
(100%)
100
(69%)
20
(53%)
30
(20%)
10
(26%)
16
(11%)
8
(21%)
146
(100%)
38
(100%)
Total
160
(64%)
58
(23%)
32
(13%)
250
(100%)
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Table 06:
Credit Card Debt Payment Preference
Credit Card Debt Payment
Respondents
Minimum Payment
10
Partial Payment
30
12
Complete Payment
210
84
Total
250
100
Table 07:
Mode of Credit Card Debt Payment
Sources of Payments
Responses
Through ATMs
104 (42%)
Through Net-Banking
102 (41%)
18 (7%)
Standing Instructions
16 (6%)
14 (6%)
Drop-box option
90 (36%)
96 (38%)
15
SA
NN
DA
SDA
50
(20%)
138
(55%)
34
(14%)
20
(8%)
8
(3%)
26
(10%)
162
(65%)
30
(30%)
24
(10%)
8
(3%)
22
(9%)
134
(54%)
40
(16%)
46
(18%)
8
(3%)
22
(9%)
116
(46%)
32
(13%)
58
(23%)
22
(9%)
28
(11%)
136
(54%)
32
(13%)
44
(18%)
10
(4%)
18
(7%)
90
(37%)
38
(15%)
48
(19%)
56
(22%)
34
(14%)
98
(39%)
40
(16%)
40
(16%)
38
(15%)
28
(11%)
92
(38%)
26
(10%)
48
(19%)
56
(22%)
14
(6%)
72
(29%)
36
(14%)
50
(20%)
78
(31%)
14
(6%)
90
(36%)
38
(15%)
50
(20%)
58
(23%)
52
(21%)
138
(55%)
42
(17%)
6
(2%)
12
(5%)
54
(22%)
122
(49%)
40
(16%)
16
(6%)
18
(7%)
70
(28%)
136
(54%)
12
(5%)
16
(6%)
16
(6%)
22
(9%)
114
(46%)
40
(16%)
56
(22%)
18
(7%)
16
Total
4.403
1.626
1.255
1.106
.955
.866
.782
.725
.585
.406
.401
.371
.312
.206
Initial
Eigenvalues
% of
Cumulative
Variance
%
31.447
11.616
8.966
7.899
6.824
6.189
5.584
5.179
4.180
2.902
2.862
2.652
2.229
1.471
Total
31.447
43.063
52.029
59.928
66.752
72.941
78.525
83.704
87.885
90.786
93.648
96.300
98.529
100.000
Extraction Sums of
Squared Loadings
% of
Cumulative
Variance
%
4.403
1.626
1.255
1.106
31.447
11.616
8.966
7.899
31.447
43.063
52.029
59.928
Rotation Sums of
Squared Loadings
% of
Cumulative
Variance
%
Total
3.323
1.919
1.686
1.462
23.736
13.705
12.043
10.445
23.736
37.441
49.484
59.928
Components
2
3
.751
.866
Statements
1
.565
.822
.620
.630
.598
.629
.827
.836
.706
.590
.598
.511
17
: ..................
:
1) Up to 20
3) 41-60
3. Gender
2) 21-40
4) Above 61
:
1) Male
4. Level of Education
2) Female
:
1) Below Graduation
2) Graduation
3) Above Graduation
5. Employment status
1)Government Employee
3)Semi- Government
5)Professional
2) Private Employee
3)Business
6)Retired Employees
18
Income
Expenditure
19
Statements
Credit card allows purchase before funds are actually available
10
11
12
13
14
15
1 2 3 4 5