Cross-border transactions made by Bangladeshis using credit cards are on the rise, with the highest volumes reported in India, according to Bangladesh Bank data.

Foreign currency transactions via credit cards saw a significant 33% increase in December compared to the previous month.

Bankers attributed the shortage of the greenback and the exchange rate advantage between purchasing it in cash and spending through cards as the main reasons. 

For instance, if a person spends US dollars using a credit card, he/she has to pay Tk110-112 per dollar, whereas the rate would range from Tk120-130 per dollar for cash purchases.

Bankers also say currently, more people from Bangladesh are travelling to India than to any other country.

According to data from the Bangladesh Bank for December 2023, it is evident that the majority of credit card transactions occurred in India, accounting for 19.95% of all transactions.

In the final month of 2023, such transactions amounted to Tk579 crore, with Tk116 crore being spent in India alone.

Of the remaining amount, 12.63% was spent in the US, 10.25% in the UAE, 10.08% in Thailand, 6.91% in Singapore, 6.38% in Saudi Arabia, 5.88% in the UK, 5.53% in Canada, 3.72% in Malaysia, 2.62% in Australia, 2.23% in the Netherlands, 2.14% in Ireland and 11.66% in other countries across the world.

A senior official of the Bangladesh Bank told The Business Standard, “There is currently a dollar crisis in our country. Most people cannot travel with cash dollars. They are compelled to use dollars on cards.

This outflow further decreases dollar liquidity in our Nostro accounts. If the rate of dollar outflow exceeds the rate of inflow, the situation may worsen.”

The official pointed out that December is the season when people travel more, resulting in an increase in card-dollar spending.

The spending habits of credit cardholders engaging in cross-border transactions mirrored the domestic pattern in December 2023. These individuals mainly used their cards in department stores, accounting for 28.25% of the total transactions abroad.

Among other notable categories, 15.66% was spent on retail outlet services, 12.90% in drug stores, 9.69% for cash withdrawal, 8.59% for clothing, 6.95% for transportation, and 24.91% for various other purposes.

Speaking to The Business Standard, the head of the treasury department at a private bank expressed concerns about the increase in dollar transactions through cards, stating that it is not good news at this moment because the country’s dollar outflow exceeds its inflow.

Moreover, he said travellers can obtain dollars at a lower price if they use cards, which is why they are opting for travel or medical treatment by endorsing dollars on cards. This practice is reducing the country’s dollar reserves.

“We are not receiving the dollars needed to open letters of credit,” he explained, adding that if dollars were to come from abroad through proper channels, the crisis could be managed.

The official from the treasury department continued, “However, examples of dollars being brought into our country from abroad and being spent here are very few. Additionally, the number of passengers and business visitors to our country has declined overall.”

According to Bangladesh Bank data, foreign currency transactions through a use of cards (ATM, POS, CRM, and e-commerce) in December amounted to Tk9,290 crore, reflecting a 16.45% increase compared to the previous month.