March credit card spend increases for fourth straight month

Sri Lanka’s credit card spend continued to advance through March, according to data released by the Central Bank.

The latest data available through March showed that the outstanding credit card balance of the licensed commercial banking sector increased by Rs.566 million, taking the first three months’ expansion in the outstanding balance to a little over Rs.2.0 billion. 

People were seen swiping their cards in droves ahead of the New Year when banks inundated them with irresistible offers, promotions, discounts and attractive zero interest installment schemes, which in some cases ran up to five years. 

March marked the fourth consecutive month of growth in outstanding credit card balance. The Central Bank last year slashed credit card interest rates to 18 percent in line with the overall decline in market rates.

However, March advance in the outstanding credit card slowed down from around the Rs.1.5 billion gain in February.

Card spend in Sri Lanka is not a close proxy for consumer spending as majority of the population still use hard cash for their payments.  Meanwhile, merchants also charge exorbitant fees, claiming network fees they have to pay to their banks, effectively discouraging cardholders from swiping their cards. The Central Bank is trying to make QR code based payments using one’s smartphone widely available across the island to nudge people away from cash based payments. 

With the March gain, Sri Lanka’s credit cards had a total outstanding balance of Rs.119.3 billion, up from Rs.117.3 billion in December 2020.

Meanwhile, licensed commercial banks approved 5, 449 new cards in March taking the total number of cards in operation to 1,905,633, less than one fourth of the labour force in the country.