Credit Card use behavior among the students

in Bangladesh

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1. Abstract
Economic structure plays a vital role to drive consumer spending attitudes in different countries. Bangladesh is
considering as a lower middle-income country that indicates citizen of Bangladesh doesn’t have significant
ability to increase their spending habits. Bangladeshis’ are experiencing credit card not more than two decades.
Also accepting credit card by wider merchants in terms of payment is also comparatively new practice in
Bangladesh. In this regard, the financial institutions / credit card issuers and retailers are experiencing new
spending behaviors of credit card holders specially students. Primarily, the paper attempts to investigate
behavioral usage patterns of credit card among students in the emerging economics.

2. Introduction

Numbers of Credit card holdings and usages have been increasing significantly in recent decades across the
globe. This trend’s is reaching popularity as a preferred mode of payment for shopping and other various
services like: utility bill payments, online payment across the border due to convenient method of payment in
terms of cash, checks, pay order or other way of payment.

Credit card is an electronic based plastic card mostly known as plastic money that bears an account number
assigned to a cardholder with a credit limit used to purchase goods and pay for services. The card holder repays
the money later within specific time. It is convenient to carry a plastic card rather than to carry bundles of cash.
It also helps lowering the risks of losing money, usually issued for a year with renewal facility available. A credit
card increases purchasing power, eases the transaction process, and allows for obtaining credit facility for a
definite period.

Standard Chartered Bank is the pioneer issuer of credit card in Bangladesh. In January 1997, the bank launched
its local currency-based credit cards from both visa and MasterCard. In the first few years, it got a huge response
from the consumers because it reduced the risks of carrying cash and fosters expensive buying. Dhaka Bank,
United Commercial Bank, Prime Bank, National Bank and Dutch Bangla Bank Ltd are also strengthening
foothold in this market. These banks offer VISA card, Master Card and the American Express credit cards. But
the credit card market is dominated by the Master Brand.

The use of Cards as a payment instrument for purchasing goods and services is increasing day by
day. Because of convenience, security and increase in the electronic point of Sales outlets (POS) and
incentives offered by Credit Card Issuers the usage of Credit Cards are flourishing. It also become popular among
university students.

3. LITERATURE REVIEW
There are no sufficient papers or publications regarding the credit card in Bangladesh. Different banks offer
different credit cards to the people having different facilities in Bangladesh. Some people show negative
attitudes toward the credit card like insurance policies.
Actually, credit card is at the initial stage in Bangladesh. Most of the people in Bangladesh are not familiar with
the culture of using credit card. Few people use the credit card only for the prestige and status. If the companies
establish the ATM booth and make it easy and simple for the customers to use these instruments, then the users
of the credit card will be increasing day by day in our country.

Different factors like balance transfer, worldwide acceptance, immediate cash advance, convenient payment
option, twenty-four-hour cards center, increases purchasing power, eases the transaction process that will
increase the number of credit card users and their preferences in choosing credit card in Bangladesh.

Today’s banking world there is no even any one bank without credit card facility. It is a key operation of the new
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banking system. All the bank’s account holders are now enjoying this facility with great appreciation. All the
banks are now trying to give the most hassle free and comfortable system to enjoy the facility. Credit Card has a
good future market in Bangladesh.
The study emphasis only on credit card usage behavior among MBA students in Bangladesh. It did not discuss
the total factor that describes the preference of selecting credit card.

4. Significance of the Study

In recent years, there has been a dramatic growth in credit card usage among university students specially in
post-Graduation. This increase in the number of students holding credit cards and incurring credit card debt has
generated concern that these students are overextended and unaware of the long-term consequences
associated with severe indebtedness. When other debt is added to this, such as educational loans, the concern
becomes even greater.

If used responsibly, credit cards can provide a number of advantages to students. Credit cards can be convenient
means of payment, a useful tool for learning financial responsibility, a resource in case of emergencies, a means
to establishing a good credit history and a way to gain greater access to credit in the future.
If credit cards are mismanaged or misused, however, the disadvantages can result in severe financial
consequences.

The convenience of credit may tempt students to live beyond their means. Excessive credit card debt and late
payments can damage students’ credit ratings and make it more difficult for them to obtain credit down the
road. In addition, students who are financially inexperienced may not understand the cumulative effect that
interest rates can have on the amount of debt owed. Inexperience with credit and a lack of personal financial
knowledge are likely to place some students at greater financial risk for having large, and perhaps
unmanageable, debt burdens when they graduate.

5. Objectives of the Study

This study has the following main objectives:
i) To identify the usage behavior of credit card among MBA students in Bangladesh.
ii) To examine the interaction of different variables, e.g. age, income level, multiple card holding, etc. giving rise
to the increasing trend of credit card use and compare this within and between groups.

6. Methodology of the Study

Research instructions:
A structured questionnaire was prepared based on group discussion and objectives of the study. The
questionnaire was organized into two sections: Demographic and Analytical. Demographic information includes
sex, occupation, age, educational level, income level and frequency of usage of credit card of the respondents.
Analytical section includes questions that identify the respondent’s problems, opportunities, and satisfaction of
using their credit cards.

Sampling and data collection:

This research is mainly based on primary data. Some secondary data were also used. A sample of total 85
customers is taken in this study from various region in DHAKA. The interviews were conducted face-to-face, over
telephone and also through email contact. Different modalities were used to improve response rate, and also to
interview participants who were found to be out of the locality.

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One Key Point to include, all the respondents in this study are either full time or part time job holder who are
studying different universities in Bangladesh.
7. Limitations
The methodology section would be incomplete without a discussion of the study’s limitations. Most of
the limitations are a result of the students being notified by e-mail or different messenger apps platform and the
survey being conducted online.

One Key Point to include, all the respondents in this study are either full time or part time job holder who are
studying different universities in Bangladesh. So, this may not the provide the overall picture of student credit
card user rather it focusses on only the students who have credit card.

Some students may have felt uncomfortable answering the survey and chose not to participate. Some also, may
have been concerned about whether or not the data would, in fact, be kept confidential. Some students,
because of an increase in online survey requests, may have felt that this was “just another survey” and had no
interest in participating. These factors may have affected the student response rate.

8. Data Analysis:
Table. Age group by respondents

Frequency Percent Cumulative Percent

Valid Age between 30-35 72 84.7 84.7
Age between 27-30 11 12.9 97.6
Age between 24-27 2 2.4 100
Total 85 100.0

Table shows that the most of the users, almost 78.8% respondents possess single credit card. However, some
users have more than two credit cards in their wallets.

Table 1. Number of credit cards held by respondents

Frequency Percent Cumulative Percent

Valid One credit card 67 78.8 78.8
Two credit cards 16 18.8 97.6
Three credit cards 2 2.4 100
Total 85 100.0

Table 1 shows that the most of the users, almost 78.8% respondents possess single credit card. However,
some users have more than two credit cards in their wallets.

Table 2. Monthly income of respondents

Frequenc Percen Valid Cumulative

y t Percent Percent
Valid BDT.21000 to 30000 24 28.2 28.2 28.2
BDT.31000 to 40000 21 24.7 24.7 52.9
BDT.41000 to 50000 16 18.8 18.8 71.8
BDT.51000 to 60000 8 9.4 9.4 81.2
BDT.60000 and 16 18.8 18.8 100.0

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 above
Total 85 100.0 100.0
Table 2 shows the income level of participants in the survey. About 80% of the respondents have an income
level between Tk. 21,000 and Tk. 60,000; and rest of 20% has income above Tk. 60,000.

Table 3. Credit limit of the credit card users

Frequency Percent Valid Percent Cumulative Percent

Valid Up to tk.1,00,000 15 17.6 17.6 17.6
Up to tk.5,00,000 29 34.1 34.1 51.8
Any other amount 41 48.2 48.2 100.0
Total 85 100.0 100.0

Table 3 shows credit limits are mostly up to Tk. 5,00,000, which is about 34% of customers. But many
customers (about 48%) ticked the option of ‘any other amount’ which appeared to be both below option 1 of
up to Tk. 1,00,000 .

Table 4. Outstanding on the credit card

Frequency Percent Valid Percent Cumulative Percent

Valid BDT.1000 to 100000 23 27.1 27.1 27.1
BDT.101000 to 200000 10 11.8 11.8 38.8
BDT.201000 to 300000 9 10.6 10.6 49.4
BDT.301000 to 400000 2 2.4 2.4 51.8
BDT.401000 to 500000 1 1.2 1.2 52.9
Any other amount 40 47.1 47.1 100.0
Total 85 100.0 100.0
Table 4 reveals the outstanding balance in the credit card to be mostly between Tk. 1000 and Tk. 1,00,000 for
27% of the customers using credit cards. However, the option for ‘any other amount’ which was ticked by 47%
of the customers, showed that many of the option 6 as was specified by the customers were within the option
1 of balance between Tk. 1000 and Tk. 1,00,000. So, the combined percentage of option 1 and option 6 would
be the highest of 74%. Besides these, the outstanding balance between Tk. 1,00,000 and Tk. 5,00,000 in the
credit cards is about 25% of the customers, which may reflect a bad sign that users may have ended up with
difficulties either in repaying the balance or with the debt incurred through the excessive use of credit cards.

Table 5. Time takes to pay out credit card balance

Frequency Percent Valid Percent Cumulative Percent

Valid One-off payment of whole balance 10 11.8 11.8 11.8
Minimum payment every month 40 47.1 47.1 58.8
Other mode of payment 35 41.2 41.2 100.0
Total 85 100.0 100.0
Table 5 shows the frequency analysis of time repayment that one-off payment of the full outstanding balance
method was only used by 12% of the credit card users, whereas the minimum payment method was embarked

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 on by 47%, i.e. approximately by half of the customers, which may be a warning sign of strain in repayment
and accumulation of debt.

Table 6. User-friendly or complicated to use of credit card

Frequency Percent Valid Percent Cumulative Percent

Valid Highly user-friendly 11 12.9 12.9 12.9
User-friendly 49 57.6 57.6 70.6
Neither user-friendly nor
complicated 23 27.1 27.1 97.6
Complicated 2 2.4 2.4 100.0
Total 85 100.0 100.0
Table 7 reflects how user-friendly the customers find the use of credit cards. About 58% of customers find it
user-friendly with 13% finds it highly user-friendly. However, a good number of users, more than 27% found it
neither user-friendly nor complicated with only less than 3% found it complicated. If options 1, 2 and 3 are
combined, it shows that more than 97% of customers did not find the use complicated, whereas only 2%
found it complicated.

Table 7. The use of credit card cost-effective and satisfactory

Frequency Percent Valid Percent Cumulative Percent
Valid Highly cost-effective and satisfactory 1 1.2 1.2 1.2
Moderately cost-effective and satisfactory 6 7.1 7.1 8.2
Cost-effective and satisfactory 20 23.5 23.5 31.8
Neither cost-effective nor satisfactory 33 38.8 38.8 70.6
Not at all cost-effective or satisfactory 25 29.4 29.4 100.0
Total 85 100.0 100.0

Table 8 reveals how cost-effective and satisfactory were the use of credit cards. More than 29% of users
found it ‘not at all cost-effective or satisfactory’ and about 39% fond it ‘neither cost-effective nor
satisfactory’. However, about one quarter of the users fond it to be cost-effective and satisfactory.

Figure 1. Amount of bill paid each month.

Amount of bill paid

Mineach month
imu
m
due
14
Full %
Pay
me
nt
49 Mo
% re
tha
n
min
imu
m,
but
less
tha
n
full
37
%

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 Figure:2 Frequency of parents or others paying bills.

Frequency of parents or others paying bills

Always
Almost always 13%
Frequently 5%
Once in a while 9%
53%
Never
19%

Figure:3 Credit cards used for cash advances

Credit cards used for cash advances

90.00%
80.00%
80.00%
70.00%
60.00%
50.00%
40.00%
30.00%
20.00% 15.00%
10.00% 2.50%
1.00% 1.50%
0.00%
Always Almost always Frequently Once in a while Never

9. Discussions of the Results

This descriptive study was attempted to outline the extent of use of credit cards among MBA students who are
job holders and its implications The findings of the survey reveal that the card use varies significantly with the
age of the users-the young age groups use the cards more frequently as they found it to be user friendly and
secured; the more they use the cards, the more interest they pay on their borrowing, because nearly half of the
users attempt to pay only the minimum required amount-thereby attracting more and more interest on the
remaining balance; and most strikingly, majority of the users are found to be in difficulties in keeping up
repayments and were affected by debt in many ways, e.g. consumption and saving.

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10. Conclusion
Credit card is at the initial stage in Bangladesh. In its preliminary stages, it offered only few facilities to the users.
Now it offers a lot of facilities to the credit card users. Findings shows that different age groups differ
significantly in the satisfaction of using credit card
Factors like maximum limit of the card, loan payment system, and loan processing system had a great influence
in the preference of selecting credit card. Different types of credit cards are offered to different income groups
of people. Higher income groups of people enjoy higher facilitating credit card including higher credit limit, more
gifts and rewards on credit card purchase, more acceptability worldwide etc.
In fine, this study states that customer’s preference in selecting credit card is also influenced by some factors
like availability of issuance of credit card, maximum limit of credit loan, easy conditions to acquire a credit card,
issuing credit card to minimum levels of incoming people, large age range, more grace period to repay loan
without interest etc.

11. References
 Alam, M. Z. (2009), Credit Card Marketing in Bangladesh: Present status, problem and prospect. An
empirical study, Article Trader, Retrieved from http://www.articletrader.com/
 Ahsan, B. (2013, September 09). Use of credit cards on the rise, The Financial Express, Retrieved from
http://www.thefinancialexpress-bd.com/
 Tajul Islam B. (2015, December 09). The Rising Trend in the Use of Credit Cards in Bangladesh and Its
Implications on Over-indebtedness and Its Difficulties in Personal Finance from http://www.hrpub.org

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