Consumer Perception and Attitude towards Credit Card Usage: A Study of Pakistani Consumers

By Ahmed, Afshan; Amanullah, Ayesha et al. | Journal of Comparative International Management, June 2009 | Go to article overview

Consumer Perception and Attitude towards Credit Card Usage: A Study of Pakistani Consumers


Ahmed, Afshan, Amanullah, Ayesha, Hamid, Madiha, Journal of Comparative International Management


Consumer financing have become increasingly important in the private sector of Pakistan for the last two decades. With the new reforms in the banking sector, the marketing of financial products has become very competitive, creating a need for strategizing the marketing efforts. This study investigates the shift of Pakistani consumers towards the use of plastic money, with emphasis on credit cards. A survey of consumers holding (at least) one or no credit card were used for data collection. Variables related to demographics such as age, income level and gender have also been taken into consideration. This study makes (the) use of descriptive variables in terms of analyzing the general attitude about the use of credit cards and the factors contributing towards the selection of (a) one particular credit card over the other. A positive relationship has been found between the income level of a person and his/her possession of the credit card. While making the choice of a credit card the trust in a particular brand name seems to hold a very significant importance in the selection of a credit card, instead of the logo of Visa or Master card. The profession of the person seems to play a very interesting role with their behavior towards credit cards. Our study shows that the bankers hold negative attitude towards the use of a credit card. The moderating variables include the marketing campaign of a particular bank, sales teams support, openness from retailers for accepting credit card instead of cash, knowledge about the true interest rate imposed by the banks and the concept of Islamic mode of financing, etc. Based on our observations, suggestions have also been made for managers to refine the target market.

1. Introduction

The credit card penetration rate in Pakistan has been slow considering that it is in the market for over 20 years. One of the reasons for the initial slow growth rate was that the product was targeted to the elite class which comprised of less than 10% of the population. But today the market presents a different picture. With increased liquidity of banks, there has been an overall push towards the supply of consumer finance that includes personal loan, house mortgage, credit cards and auto loans. Today, consumer financing forms more than 25% of the total private sector credit (Economic survey, 2006-2007) in Pakistan.

In Pakistan since the year 2000, there has been a massive reform in the financial sectors by privatization and the restructuring of banks and financial institutions. According to the Economic Survey of Pakistan 2007, the financial and insurance sector has seen a startling growth of 18.2% despite the fact that government raised the interest rates over the last two to three years to control the rising inflation in the country. In addition, State Bank of Pakistan (SBP) has laid out stringent requirements for banks to get formal approval of those given credit and from the Credit Information Bureau to keep a check on non performing loans.

However, SBP holds no strict regulation for the issuance of credit cards in the prudential regulations as compared to the disbursement of personal loans, auto loans and house mortgages. The limit of credit cards can be extended to two million rupees in case of a privileged customer.

The importance of credit cards, both as a payment and short-term financing medium to today's consumers, is no longer debatable (Chakravorti and Emmons 2001; Hayhoe et al. 2000).

The unsecured loans, in the form of credit cards, are increasing at a high rate. According to the Economic Survey of Pakistan 2006-2007 the credit card holders are increasing at the rate of 50% annually. In December 2006, the total credit card amount outstanding was Rs. 39198 Million (a substantial increase from Rs. 19340 Million in June 2005. Yet the market remains unsaturated and a low number of cardholders exist as compared to other developing countries. …

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