Effect of credit card usage on consumer behavior

With the advancement of technology, we have been leaving digital traces imprints in every walk of their life. As the pattern of consumer purchase behaviour is changing with the advent of digitization, several research studies have published their analysis regarding this consumer switch from traditional to the modern way of […]

With the advancement of technology, we have been leaving digital traces imprints in every walk of their life. As the pattern of consumer purchase behaviour is changing with the advent of digitization, several research studies have published their analysis regarding this consumer switch from traditional to the modern way of transaction. The researchers of this present study are keen on unveiling the extent and nature of the modern-day payment method’s ownership, i.e., credit card.
A research study published by Godfrey Themba named ‘Credit Card Ownership and Usage Behaviour in Botswana’ highlighted the rising influence of the credit card ownership among Botswana citizens. This study focused on supporting the association between the owner and the credit card facilities’ demographic and usage characteristics. This study’s findings re-direct its focus on the fact that there is a link between credit card usage and their owners’ age, income, and educational qualifications.
There is a correlation between this study’s findings and the theoretical research contribution by Pamela S. Norum titled ‘The role of time preference and credit card usage in compulsive buying behaviour.’ Here, the authors present valuable information regarding the development, revisions, and subsequent policies for educating and counselling their readers with the proper usage of digital and traditional financial resources.
Regression analysis highlights different factors adversely affecting the patterns of consumer purchase behaviour. These factors include credit card usage, rate of time preference, income, source, money-making/saving attitude, among others.
Electronic money transfer systems such as credit card facilities aids in enabling cashless modes and falls in line with smart card technology; although there has been a link with a wide array of advantages, such as carrying physical cash every time, it is not feasible. Nevertheless, it may increase overall consumption, reduce savings, surging personal debt levels, among others.
One of the critical factors contributing to low savings with credit card holders is that they lack a self-control attitude, enabling them to use their smart card technology efficiently. With the advent of smart card technologies, there is an observation that the owner’s purchase has gone up. The Trans Union CIBIL results published in the year 2017 highlighted that the credit card reliance of the Indian consumers went up by 57% in the past 12 months. Further, it also predicted that around 19 percent of the potent urban consumers are likely to make new credit card purchases in the future.
This increasing surge was simple – credit card usage offers discounts and other related rewards when the owner purchases out of the same. Furthermore, youngsters in the age group of 18 to 24 years do not like to carry physical cash in their wallets and, thus, stand in compliance with the smart card facility. However, not every person using a credit card uses it responsibly. People often tend to forget that their credit card usage is directly associated with their Credit Score. In turn, the way a consumer arrives at a borrowing decision dramatically influences both these factors. They must invest valuable time understanding how their purchasing behaviour via credit card facilities affects their monthly Credit Score.
Launching a financial literacy awareness program might help people understand the importance of cashless transactions in the present era—other than that, the inclusion of financial education as a compulsory part of schooling education. Timely webinars, seminars, among others, can be orderly prioritized in these regions to spread awareness regarding financial education; this will motivate the youth of the country to be financially free and think from investment perspectives.
One of the main conditions where the proposed solution would not work is the developing nations’ rural and remote settlements. As both regions are still backward in financial literacy and education, these regions’ inhabitants may find it relatively difficult to understand smart card technology benefits. Furthermore, it becomes difficult for them to know what the CIBIL score is all about and how it will assist them.

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