India’s Credit Card Crisis: Why Soaring Unpaid Bills Are a Wake-Up Call

India finds itself in the grip of a mounting credit card crisis: unpaid card bills have surged by a staggering 44% in just one year, with overdue dues leaping to ₹33,886crore as of March 2025, up from ₹23,000crore the previous year. This spike isn’t just a financial headline - it’s a warning for households, banks, and policymakers.

Key Facts: The Scale of the Problem

• Sharp spike in defaults: Credit card payments overdue between 91 and 360 days shot up by 44%, a sign of deepening borrower distress. About ₹30,000crore of these dues are 3–6 months overdue—almost double compared to two years ago.
• Rising volumes: Outstanding credit card debt touched ₹2.9lakh crore by May 2025, up from ₹2.67lakh crore a year ago.
• Unrelenting usage: Despite rising debt, card swipes jumped 15% in a year, with ₹1.89lakh crore spent using credit cards in May alone and the number of active cards doubling over four years.

Why Is This Happening?

• Easy credit and changing lifestyles: Aggressive promotions, instant approvals, and a surge of young, aspirational spenders have led to unprecedented card use.
• Inflationary pressures: With costs rising, many middle-class families are using credit cards as stopgaps for everyday needs rather than just emergencies or luxury purchases.
• Lack of financial planning: Many users, attracted by rewards and easy credit, are unaware of high interest rates (often 35–42% per annum) and the debt trap that missing payments can bring.
• Limited financial literacy: Most people don’t fully understand minimum payment requirements, compounding of interest on unpaid balances, or the impact of defaults on credit scores, impact of inflation on lifestyle, importance of investment for future, importance of embracing good financial habits, planing for retirement.

How Can Individuals Reduce Their Credit Card Burden?

• Track and budget: Monitor expenses rigorously and create a monthly ceiling for credit card spending.
• Prioritise full payment: Always repay card bills in full, not just the minimum due, to avoid steep interest charges.
• Limit the number of credit cards: Too many cards can lead to fragmented tracking and missed due dates.
• Avoid cash advances: These carry higher fees and interest than purchases.
• Seek professional advice: If overwhelmed, consult a financial advisor for a debt repayment strategy.

Building Resilience: How SIPs and Saving Habits Help

Regular savings and investing through mutual fund SIPs (Systematic Investment Plans) promote financial discipline, future readiness, and wealth creation.

• SIPs create a savings buffer: A set amount is deducted and invested automatically, growing a corpus that can be tapped in emergencies - reducing reliance on credit cards.
• Tackle inflation: By increasing Mutual fund SIPs in line with salary hikes, you ensure your savings outpace inflation and align with evolving goals.
• Habitual saving: SIPs instill a culture of “paying yourself first”—so unplanned expenses don’t derail your financial plan.

Insurance (Term and Health): Your Best Emergency Risk Cover

Unexpected job loss, illness, or accidents are top reasons why people struggle to pay bills. Here’s why term life and health insurance are vital.

• Financial protection: Term insurance ensures your family can manage debts and expenses if you’re not around,as it will be critical for anyone with liabilities like home loans or credit cards.
• Health insurance as shield: A single hospitalisation can wipe out years of savings; proper health insurance coverage means medical emergencies won’t force you into debt or lead to withdrawal of hard earned savings or investments.
• Mental peace: Knowing that personal health insurance serves as a financial safety net reduces anxiety and prevents rash borrowing in a crisis.

Takeaway: The Way Forward

India’s credit card crisis is a symptom of over-leveraged households and inadequate financial planning. By embracing regular saving via SIPs, developing budgeting discipline, and ensuring robust protection through term and health insurance, individuals can insulate themselves from financial shocks and break the cyclical trap of debt. Let this be a clarion call to reset habits and build financial resilience for the future.