By a special correspondent
As New Year shopping peaks across Sri Lanka, a parallel financial trend is emerging beneath the festive activity of the Sinhala and Tamil New Year: a rapid resurgence in credit card usage, supported by aggressive bank promotions, even as concerns grow over rising household debt stress.
Recent data from banking sector disclosures and central bank indicators show that Sri Lanka’s credit card market has expanded steadily into 2026. By January, the number of active cards had reached 2,176,299 up from 2,166,186 in December 2025 signaling renewed consumer confidence as the economy stabilizes.
Total outstanding credit card balances stood at approximately Rs. 165.7 billion by late 2025, with annual growth in balances reaching around 10%. Spending patterns show that cardholders are primarily using credit for clothing, groceries, home goods, dining, travel, and festive giftingcategories heavily concentrated during the Avurudu season, which remains the country’s second-largest consumption period after Christmas.
However, this revival in spending is unfolding against a backdrop of persistent financial strain. Despite a reduction in the Average Weighted Prime Lending Rate to around 9.28%, credit card interest rates remain significantly higher, ranging between 26% and 28%. This widening gap between secured and unsecured lending has raised warnings among financial analysts about a potential “credit trap,” where households increasingly rely on expensive revolving credit to manage daily expenses.
By the end of 2025, more than 157,000 credit cards had fallen into default, carrying outstanding arrears of over Rs. 20.1 billion. These defaults are reflected in credit bureau records, restricting future borrowing opportunities for affected consumers and trapping many in long-term financial exclusion.
Yet, banks have intensified efforts to stimulate spending during the festive season. Leading financial institutions are offering extensive promotional packages, including 0% interest installment plans stretching up to 48 months, cashback incentives of up to 3%, and targeted “shopping days” with exclusive discounts. Retail partnerships across thousands of outlets have further expanded the reach of these schemes.
Some banks have also synchronized promotions with peak shopping dates, such as early April discount campaigns, effectively turning the Avurudu period into a structured credit-driven consumption cycle. In parallel, the government has encouraged digital transactions by waiving service charges on selected e-payments, aiming to expand formal cashless spending.
Despite the optimism in transaction volumes, economists caution that the recovery is uneven. While credit expansion signals renewed activity, the reliance on high-interest unsecured borrowing suggests underlying fragility. For many households, Avurudu 2026 is being financed not by rising incomes, but increasingly by deferred debt raising questions about the sustainability of the current consumption rebound.