CREDIT CARDS AND PERFORMANCE OF COMMERCIAL BANKS PORTFOLIO IN KENYA

Abstract

The use of credit card as an investment option to commercial banks has gained popularity over the years. Kenya’s growing middle class have preferred the utility of credit cards to hard currency as a safe way of making purchases and executing business transactions. This trend has increased competition among commercial banks as they position themselves for business investment which has now raised concerns about the effects of credit card on performance of commercial bank portfolio. This study sought to determine the effects of credit cards on performance of commercial banks portfolio in Kenya and particularly in Migori town. The study sought to determine the relationship between adoption of credit cards and credit card holders’ satisfaction and to establish whether adoption of credit cards has improved commercial banks revenue. The study adopted descriptive design. Open and closed questionnaires were distributed to six (6) commercial bank managers who were selected through purposive sampling and 120 credit card holders. The data was analysed by use of Pearson product moment correlation coefficient, simple regression analysis and chi-square. The results showed that credit cards have contributed positively to satisfaction of credit card holders and adoption of credit cards improved commercial banks revenue. The study recommends that there is need for commercial banks to widen their credit card market so as to benefit more from usage of credit cards so as to improve their returns.