Do not get lured by attractive offers, cashbacks this Diwali!

Market is ready  with plethora of discount and cashback offers for  Diwali Shopping. E-commerce companies have brought out several offers to entice customers. In fact, in both online and offline marketplaces, companies have rolled out many such offers. Some people get carried away by these offers and shop blindly with credit cards, but when the credit card bill arrives, they regret it. If you don’t make a timely payment on this bill, you could fall in the debt trap. But you don’t need to be afraid. If you shop wisely, you can make the most of your credit card benefits. How can you use a credit card correctly during the festive season? Let’s find out

Understanding the Billing Cycle

When you shop with a credit card, you get interest-free period of up to 50 days. To take advantage of this feature, you need to understand the basis of billing cycle. For example, your card’s billing cycle is from the 1st to the 31st of the month. If you shop throughout the month of November, the bill will be generated on December 1st, which you can pay by December 20th. This way, if you shop in the first week of November, you’ll get more days of interest-free benefit. If you shop on November 30th, you’ll have only 20 days to clear the Interest-free outstanding bill.”

Use it within a Limited Range

During the festive season, you can avail of bumper discounts or cashback. It’s wise to take advantage of these offers. However, you should keep your credit card expenses within a limited range. Keep an eye on the Credit Utilization Rate or (CUR) of your card. CUR shows the percentage of your credit limit used. According to experts, a CUR of up to 30% is considered ideal. For example, if your card has a limit of 1,00,000 rupees, you should spend up to 30,000 rupees. Spending more than this can potentially harm your credit score. If your CUR is going beyond 30%, you should consider increasing your card limit.

Benefit from Cashback and Reward Points

On the occasion of Diwali, you get hefty discounts and cashback on credit card purchases. But keep in mind that not every product is included under these offers. Cashback is usually available on purchases made above a certain limit. Many times, there is a maximum limit on cashbacks. For example, a card may offer a 10% cashback on an e-commerce site, but it may have a maximum limit of 500 rupees. Understand the terms and conditions of cashback and discount offers clearly. Avoid unnecessary shopping driven by the allure of  cashbacks and discounts.”

Understanding No-Cost EMI

During the festive season, the offer of ‘No-Cost EMI’ attracts customers the most. It allows customers to make payments for a product in  installments. However, as good as this feature may seem, it doesn’t always turn out that way. By using this option, you may miss out on several benefits like discounts that you would get while making payment in cash. Additionally, you may end up paying a significant amount in the name of processing fees. Thus, the convenience of ‘No-Cost EMI’ can be quite costly. Therefore, it’s essential to fully understand the pros and cons of ‘No-Cost EMI’ before shopping.

Avoid Cash Withdrawals from Credit Cards

Credit cardholders also get the facility of making cash withdrawals. The amount you can withdraw depends on the card’s limit. When you withdraw cash from an ATM using a credit card, you don’t get any interest-free period to pay it back. Interest can be levied from the first day on the amount you have withdrawn. This interest rate will range from 2% to 3%. Banks also charge a fee for this service, which can be a minimum of 250 rupees. Additionally, you’ll need to pay an 18% GST on this fee. As a result, this form of borrowing can prove to be quite expensive. Therefore, it’s advisable to avoid cash withdrawals from credit cards.

All in all credit cards can be a good option for shopping and bill payments. However, its benefits are only realized when used with discipline. Make timely payments of the full bill amount every month. Negligence in this matter can push you in debt cycle.”