A Tale of Two Metrics
For months, data from the Reserve Bank of India has painted a picture of explosive growth, with total cards in circulation crossing the 122 million mark by mid-2026. Monthly spending has consistently topped ₹2 trillion, a figure once considered a festival-season
peak, now becoming the new normal. But the most telling statistic isn't the total value; it's the widening gap between transaction growth and spending growth. According to recent reports, the number of credit card transactions in July 2026 jumped by over 24% year-on-year, while the total value of those transactions grew by a much smaller 7.4%. This has pushed the average transaction size down significantly, by about 13.5% to around ₹3,460. In simple terms, Indians are swiping their cards far more often, but for much smaller amounts. The credit card is evolving from a tool for occasional, high-value purchases into a go-to instrument for daily expenses.
The Co-Branded Card Revolution
A major catalyst for this shift is the rise of co-branded credit cards. Partnerships between banks and popular consumer brands—from e-commerce giants and food delivery apps to airlines and fuel companies—have fundamentally changed the value proposition. These cards offer targeted rewards precisely where consumers spend most frequently, such as cashback on online orders or discounts on grocery bills. This strategy reduces the cost of acquiring new customers for banks and encourages higher activation and spending. One in three new cards issued is now a co-branded one, and they are projected to account for 25% of all cards by 2028. By integrating credit into existing consumer ecosystems, these cards make using credit for everyday needs a seamless and rewarding habit, rather than a conscious decision reserved for big-ticket items.
UPI: Competitor and Collaborator
At first glance, the dominance of the Unified Payments Interface (UPI) would seem to threaten credit card growth. UPI overwhelmingly leads in transaction volume, accounting for the vast majority of all digital payments. However, the two systems have found different roles. While UPI dominates low-value, person-to-person transfers and small merchant payments, credit cards have held their ground for larger purchases and e-commerce. The game-changer has been the linking of RuPay credit cards with the UPI network. This innovation allows users to scan a UPI QR code and pay directly from their credit line, bringing credit to millions of small merchants who may not have a traditional card machine. This convergence is a key factor driving up transaction frequency for smaller amounts, effectively turning every UPI-enabled shopkeeper into a potential point of credit.
A New Generation of Spenders
The demographic profile of the Indian credit card user is also undergoing a significant transformation. Growth is no longer confined to salaried professionals in metropolitan areas. The strongest momentum is now coming from Tier-2 and Tier-3 cities, along with younger, digitally native Gen Z consumers. This new cohort is comfortable with digital payments and is entering the credit system earlier than previous generations. Having grown up with UPI as the default payment method, they view credit less as a form of debt and more as a convenient financial tool for managing cash flow and earning rewards on daily spending. For this new wave of users, applying for a card digitally and using it for everything from mobile recharges to ordering food is second nature, further fuelling the trend of high-frequency, low-value transactions.
