India experienced an economic slowdown in 2019. With banks and lending institutions reeling from the effects of NPAs and an assortment of scams and frauds, credit wasn't easily available. However, we at BankBazaar noted that Indian millennials, far from being cowed down by this slowdown, continued to find ways to fulfil their aspirations and life goals. They continued to buy homes with a strong preference for small-sized properties. They continued to buy cars with a preference for premium hatchbacks and sedans. And they also showed they wanted better rewards, deals and discounts from their premium credit cards. We've summarised these findings in the BankBazaar Moneymood 2020 report.
What also stands out in the 2019 Moneymood data is how women and small-towners borrowed. Non-metros took bigger personal loans on average: Rs 2.84 lakh compared to Rs 2.61 lakh from metros. Women took bigger home loans: Rs 25.64 lakh on average, compared to Rs 23.66 lakh borrowed by men. There was also a 43% increase in demand for premium credit cards overall and a 33% increase in the demand for such cards from women.
What's clear is that India is getting credit-savvier - something that reflects in a 111% year-on-year increase in credit score checks. As of 2019, India had around 52 million credit card users, a number that's been inching up steadily. The per capita credit card ownership in India is still very low. But now, armed with better knowledge about, and access to, credit products, Indians are beginning to upgrade to premium cards, and are no longer content with their basic, first credit cards.
Premium cards are gateways to a better lifestyle. Let's look at some of the advantages of owning one.
What Are Premium Credit Cards?
Premium cards are a step-up from basic, plain vanilla cards. Often, these carry an annual or renewal charge, and are provided by invitation to customers who have a clean credit history and/or long-standing relations with the provider bank. Unlike basic cards, premium cards provide higher credit limits, lower interest rates, accelerated points, gift vouchers and discounts, concierge and doorstep services. Let's look at these in greater detail.
High Credit Limits
Premium cards are provided to customers who have a high net worth or a great credit history. Therefore, the cards come with significantly higher spending limits. In the case of super premium credit cards, there may not be a defined spending limit since it may not be necessitated due to the card holder's high net worth. A higher spending limit also means that you enjoy a low Credit Utilisation Ratio-the percentage of the available limit you use in any month. A low CUR means having a good credit score.
Premium cards do a better job of rewarding your transactions. For example, a regular credit card may give you 1 point for every Rs. 200 spent. But a premium card may give you 2.5 points for every Rs. 100 spent. Since many premium cards carry an annual cost, the card provider may offer you gift vouchers and deals worth the price you're paying. You'll also receive accelerated rewards on select transactions with chosen merchants. For example, one card gives you 3X the rewards for all shopping abroad.
Superior Travel Benefits
Premium card holders are jet setters, so it's no surprise that their cards pack a lot of travel-related benefits. You may get air miles which can be redeemed for discounted flight tickets and free seat upgrades with select airlines depending on the number of miles you've accumulated through your card spends. The cards may come with bundled travel insurance services which will help you with cancellations, delays, theft and an assortment of problems that may strike in a foreign land. You may get discounted rooms with select hotel chains or through online travel booking companies. Regular cards may provide you lounge access, but these benefits will be higher on premium cards. For example, instead of just domestic airport lounge access, you may also get lounge access at airports abroad. Lastly, premium cards could also provide concierge services — a personal assistant who can help you make bookings, reservations, or complete tasks that make your life easy.
Exclusive Shopping Deals & Lifestyle Privileges
Premium cards will unlock a higher lifestyle for you. You will start getting deals, discounts, and gift vouchers from any merchants and establishments partnering with the card provider. You will get preferential services, bookings, and discounts at networked restaurants and fine-dining joints. You may get discounted or free movie tickets. On achieving spending milestones such as Rs 100,000 or Rs 500,000 or higher, you will be able to unlock additional benefits, such as the waiver of your annual fee or even special freebies.
It's no surprise that as more and more Indians become frequent flyers jet-setting around the world, women too are interested in improving their credit profile by accessing premium cards. But as always, premium borrowing requires premium credit awareness. Debts, especially credit card dues, should be settled on time to avoid interest penalties and damage to the credit score.
As India climbs out of its economic slowdown in 2020, we're expecting more and more women and small-town Indians to log on to the internet to fulfil their borrowing needs. With greater maturity in handling credit, we expect India to continue borrowing smartly through 2020.
(The writer is CEO, BankBazaar.com)