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Abstract:
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Financial institutions have mainly relied on incentive programs as their main strategic driver to
increase electronic payments, such as through use of credit cards. Credit cards have been
globally acclaimed for their benefits that range from their ability to ensure tax-compliance,
security, instant cash and their ability to facilitate settlement of cross-border transactions.
However, there exists a great challenge of credit card usage, such as ease of accumulation of
debts and high interest charges. The purpose of this study was to determine the effect of credit
card incentives on consumer borrowing in Kenya. The study employed a descriptive study
approach using a sample size of 18 commercial banks offering credit card services. Selfadministered questionnaires were used to collect information. Credit card incentives were
found to be a major contributor to credit card uptake. The study also found that most banks
used incentives such as rewards for repeated use, low interest rates, traveling awards and
benefits to influence the spending behavior of their clients. The study found credit card also
affected spending behavior. It is concluded that credit card incentives can be effectively used by
banks to increase use of credit cards. It is recommended that financial institutions should
educated their customers on how to use their credit cards so that they do not fall into a debt
trap. |