Credit card spending hits four-month low

Spending through credit cards hit a four-month low in February as people have become cautious in spending based on loans in the face of spiralling inflation, several bankers said today.

Many have showed the lower number of days in February than January as a reason for the fall.

In February, people bought Tk 2,312 crore worth of products and services, which was nearly 8 per cent lower than January's Tk 2,506 crore, according to data of Bangladesh Bank.

However, overall credit card-based loan, a high interest-bearing instrument, rose 10 per cent year-on-year last month from Tk 2,108 crore in February of 2022.

It is worth mentioning here that credit card spending fell only 1.4 per cent in February last year compared to January 2022's Tk 2,138 crore.

The number of transactions by credit cards also declined on month to month basis in February this year, showed the central bank data.

Mohammad Razimul Haque Razim, head of cards of the City Bank Ltd, has blamed the fall in credit card spending on the reduced purchasing capacity of the people caused by ongoing high inflation.

Many cautiously cut their spending by credit card to reduce pressure on their wallets, he said.

Razim said credit card loan is a revolving credit, which has high interest. "But if a customer clears all dues on time, there would be no interest as well."

As of February this year, banks issued 21.58 crore credit cards, which was higher from January and from the same month a year ago, data by the central bank showed.

Md Abu Bokar Siddik, head of cards of Mutual Trust Bank Ltd, said February has 28 days whereas January 31 days, which was the main reason of experiencing a fall in credit card use.

However, Md Abed ur Rahman, head of cards of Midland Bank, said a section of credit card users have already exhausted their credit limit.

Many have become cautious in spending because of the rising cost of living, he added.

Inflation in Bangladesh climbed 8.78 per cent year-on-year in February, snapping a declining trend of the previous five months.

In March, consumer prices jumped to a seven-month high of 9.33 per cent, according to Bangladesh Bureau of Statistics.

Syed Mohammad Kamal, country head for MasterCard in Bangladesh, said credit card transactions in March was good and April would be good also for Ramadan, which is an Eid shopping season.

The BB data showed that foreign currency transaction through credit card declined in February.

In February, this year, foreign currency transaction fell to a five-month low of Tk 557 crore, which is also lower by 10 per cent from the previous month's Tk 620 crore.

However, overall foreign currency transaction by cards more than doubled year-on-year from Tk 256 crore in February 2022.

Some banks have stopped promoting spending abroad through cards to lessen pressure on their forex holding, said Md Mahiul Islam, head of retail banking at Brac Bank.

"Besides we have other priorities such as letters of credit settlements," he added.

In December last year, foreign currency transactions by cards hit a record high of Tk 639 crore.