Tax planning to blame? Credit card spending hits 7-month low in Feb 2025

February has traditionally seen a slowdown in discretionary spending as consumers prioritize tax planning. Additionally, with major festive spending already concluded

There has been a notable slowdown in consumer spending across the credit card industry in February 2025, signaling the most cautious market behavior in over a year. The month saw credit card transaction volumes register their slowest growth in 13 months, according to an analysis by  Asit C Mehta Research. 

 

"Credit card spending in India registered a decline in February 2025, in line with historical trends. The latest industry data reveals a 9% month-on-month (MoM) drop in total card spends to Rs 1,672 billion, marking the lowest spending levels in seven months. However, on a year-on-year (YoY) basis, spending showed a 12% increase, albeit at a slower pace compared to previous months," said the report.

 

 

In February, total transaction volumes dropped to 396 million, reflecting a substantial 8% month-on-month decline. This marked the slowest growth in transaction volumes in 13 months, a clear indicator that consumers were tightening their purse strings. Although transaction volumes still showed a 27% year-on-year (YoY) increase compared to February 2024, the rate of growth was significantly slower than the 30% growth observed in previous months.

 

The slowdown in transaction volumes is reflective of a broader trend of moderation in consumer expenditure. While the YoY increase still suggests that consumer spending remains above last year's levels, the declining growth rate signals a shift in how consumers are approaching their finances. Many appear to be more cautious, choosing to hold off on discretionary spending or to limit their purchases. 

 

A Dip in Average Spend Per Transaction

One of the key signs of this shift in behavior is the decrease in the average spend per transaction. In January 2025, the average amount spent per transaction was Rs 4,282, but by February, this had dropped slightly to Rs 4,219. While this decline may seem small, it reflects a broader trend of consumers prioritizing essential purchases over discretionary or non-essential items.

 

Traditional February Slowdown: Tax Planning and Festivities

The moderation in spending is not entirely unexpected. Historically, February has been a month of slow consumer activity. One of the main reasons for this is the onset of tax planning season. As the end of the financial year approaches, many consumers focus on managing their finances, making investments, and planning their taxes. With less money available for discretionary purchases, consumers are more likely to hold off on spending until the tax season is over, contributing to the overall slowdown in February.

 

Additionally, February falls in a lull period between major festivals. With the festive season, such as Diwali and New Year, already behind, and the next major celebration—Holi—still weeks away, consumers typically ease off on their spending. Without the usual festive triggers to prompt large expenditures, spending patterns in February tend to remain subdued.

 

"The subdued performance observed in February can primarily be attributed to tax-related planning activities and the lack of festive occasions during the period. This, coupled with increased caution within the industry regarding unsecured lending, led to consumer expenditure declining to a seven-month low," said Akshay Tiwari, AVP - Equity Research Analyst – BFSI, Asit C Mehta Investment Interrmediates.

 

Credit Card Issuance Slows Down

Beyond consumer spending, credit card issuance also reflected a broader cooling off in the market. The total number of outstanding credit cards grew by just 0.4% MoM, reaching 109 million. While this represents a slight increase, it is a sharp contrast to the aggressive expansion of credit card issuance seen in previous years. In fact, the 9% YoY growth in credit card issuance was the slowest rate since June 2021, signaling that the period of rapid card issuance is coming to an end.