A new remarkable trend has been seen in the credit card industry, where half the cardholders revolve payments and pay just the minimum amount each month.

People who revolve credit are those who pay just the minimum amount asked by the card company before the due date and agree to pay the remaining dues at a later date. The issuing company collects interest on the overdue amount.

"The number of people who revolve payment is about half the customers in India for the industry. In terms of customer numbers it is about 35-40%” said Sachin Khandelwal, head - cards product group, at ICICI Bank. "But that would be half the book value or even 50-65% for some banks," he added.

Khandelwal did not give an exact number to the people who revolve credit at ICICI Bank, which has issued about 9 million cards since 2000. But, said that, "We are on the higher side."

Analysts don’t see anything wrong in this new trend involving high revolving rate of credit cards. In fact, they say such an indicator is a sign of a maturity of the market.

Tarun Bhatia, head corporate and government ratings, Crisil, said that a higher revolving rate means customers are increasingly using the credit card to pay off their overdue loans. He pointed out that in the developed markets, the revolving rates for credit cards are higher than 80%, and hence, it’s early to press the panic button.

"The revolving rate in terms of value was about 30-35% a few years ago. It has now gone up to 50-60%, but that is not a concern, the concern will only be when people who are revolving don’t really have the credit worthiness to repay their loan," he said.

However, as banks tighten their lending norms to focus on better quality and high income customers, Bhatia expects the revolving rate to decrease marginally.

ICICI Bank has come up with several options to keep a check on cardholders who revolve. These include equated monthly installment (EMI) option or conversion to a personal loan, for people who cannot clear the entire outstanding in a month.

"Suppose you have spent Rs 70,000 when your disposable income is Rs 30,000. Then you start revolving at a very high rate of 3-3.35% and the charge keeps adding up. So you can call up and convert the transaction into installments," Khandelwal said.

Customers are additionally benefited if ICICI Bank has a tie-up with the merchant who sold the goods, because then they can get an interest rate of 0-12%.

"Otherwise we price the EMIs at 18%.” Khandelwal said. “We encourage EMI, as they are convenient for customers against the credit card charge are 36%," he said.

"We have also brought it (the EMI facility) to merchants. Instead of calling customer care you can swipe the card and convert the payments into EMIs at the swipe itself. You tell the merchant that I want the 6 or 9 or 10 installment option," he said.

Taking a step in the same direction, the bank has launched an EMI card. "We launched the card in 2006 and have been pushing it for one year," Khandelwal said.

Under the card, one can choose between Rs 1,000-4,000 of payment per month, which comes with a limit. You choose the 2,000 or a 4,000 card and you buy a refrigerator and you start paying installments. Later if you buy a TV, this amount adds on to your basket, but your tenure will change.

Our emphasis here is that the customers still have the power to purchase, but they do not get carried away, the credit card head added.

The other option is to convert the outstanding amount to personal loans. Khandelwal said, "Sometimes you don’t want to pay Rs 75,000 in one shot, you are not able to. So if you can, do it in 2-4 installments. Beyond that, convert it to a personal loan."

Going by the seen trend, he anticipates more response to the installment story on the travel and consumer durables segment. Noticing that ICICI Bank’s biggest credit card spends today is on travel and hotels put together, the card-head added, "This has really grown in the last two years. Airline tickets and domestic and overseas holidays are the largest, fuel is the third largest spend, followed by jewellery, retail garments and retail outlets."

ICICI had seen this trend coming and had abandoned the post dated cheque model for consumer durable loans, in favour of the "cost effective and quicker" credit card model this March.

"We have realised that in the consumer durable business, only one-seventh or one-eighth (roughly 12-14%) business was on loans and the balance 7 out of 8 customers were anyway using a credit card."