For a long time, credit cards in India were seen as a metro-only product. They were linked to malls, airports, and large online purchases. That picture has changed quietly but decisively. Today, the strongest momentum in credit card growth is coming from Tier-2 and Tier-3 cities.
Data from regulators and payment networks makes one thing clear. India’s next phase of credit expansion is not urban luxury spending. It is everyday digital spending in smaller cities.
The Digital Payments Foundation Is Already in Place
The biggest reason behind this shift is UPI. According to data released by the National Payments Corporation of India, UPI processes tens of billions of transactions every month, and a large share of this volume now comes from non-metro regions.
The Reserve Bank of India has repeatedly highlighted that Tier-2 and Tier-3 cities are seeing faster growth in digital transaction volume than metros. In simple terms, smaller cities adopted UPI not as an alternative, but as the default payment method.
Once UPI became normal, the infrastructure barrier for credit disappeared.
Credit Card Issuance Is Growing Faster Outside Metros
RBI data shows that while overall credit card numbers continue to rise, incremental growth is increasingly driven by semi-urban and emerging urban centres. Banks and fintechs are issuing more first-time credit cards in Tier-2 and Tier-3 cities than ever before.
The reason is practical. These cities have a growing salaried population, rising consumption, and strong digital behaviour. People may not spend heavily on luxury, but they spend consistently on daily needs.
Credit products that match this spending pattern naturally see higher adoption.
Small-Ticket Spending Creates Big Credit Volumes
Unlike metros, where credit cards are often used for high-value purchases, Tier-2 and Tier-3 India runs on small-ticket transactions. Groceries, fuel, medicines, tuition fees, and local services dominate monthly spending.
UPI made these payments digital. Credit on UPI is now making them credit-enabled.
NPCI data indicates that UPI-linked credit card transactions are far more frequent than traditional card usage. Even if individual transaction values are low, volume compensates. Over a month, this creates meaningful credit usage without lifestyle inflation.
This model works far better in smaller cities than the old swipe-based credit card approach.
Merchant Acceptance Is No Longer a Problem
One of the biggest historical challenges for credit cards in Tier-2 and Tier-3 cities was acceptance. POS machines were limited. Merchants avoided card fees. Customers fell back on cash or debit.
UPI changed this equation completely. QR codes are everywhere. From kirana stores to medical shops, digital acceptance is already built in.
When credit cards run on UPI rails, they inherit this acceptance instantly. RBI has also highlighted that lower MDR structures for UPI transactions encourage merchant participation, especially for small-value payments.
This is a structural advantage that traditional credit cards never had in smaller cities.
First-Time Credit Users Are Entering the System
Another important data point is the rise of first-time credit users. Credit bureaus and banks have reported that a large share of new credit card customers in recent years come from non-metro regions.
These users are cautious. They prefer controlled spending, visibility, and simple repayment cycles are not looking for premium lounges or complex reward programs. They want credit that feels safe and familiar.
UPI-based credit fits this need better than traditional cards.
Why This Growth Is Sustainable
This is not a temporary spike. Tier-2 and Tier-3 India is seeing long-term changes. Incomes are rising. Digital literacy is improving. Formal employment is expanding beyond metros.
RBI’s long-term payment system vision emphasises inclusive digital credit and deeper penetration outside major cities. That direction strongly favours products that work on UPI and support small, frequent transactions.
Credit growth driven by daily needs is far more stable than growth driven by occasional luxury spending.
The Bigger Picture
Metros may still dominate credit card value, but smaller cities are driving volume, frequency, and new user growth. That is where the future lies.
Tier-2 and Tier-3 India is not catching up anymore. It is setting the direction for how credit will be used in the next decade.
Credit cards that adapt to this behaviour will grow. Those that don’t will stay limited to niche use cases.
As most transactions in Tier 2/Tier 3 are made via UPI, UPI Credit card via Kiwi can be a preferred option.
