Festive season is here, and every festive season comes with a bunch of shopping offers. With all the enticing offers and discounts, it’s easy to get carried away and overspend with your credit cards. This budget stretch cause economic imbalance. To save you from this situation, we’ve got 7 tips to help you make the most of your credit cards without regretting it later.
7 ways to prudently use credit card during the festive season:
1. Watch Your Credit Utilization Rate (CUR):
Your CUR represents the percentage of your total credit limit that you’re currently using. It’s wise to keep it below 30%. Going over this limit can harm your credit score, which might affect your ability to borrow from lenders. If your CUR gets close to or surpasses 30%, consider asking your card issuer for a higher credit limit or using a debit card instead to maintain a healthy credit score.
2. Leverage Your Billing Cycle:
The billing cycle typically spans 27 to 31 days and plays a crucial role during times of high spending. Understanding your billing cycle is essential because it gives you more interest-free time to settle your dues if you start making purchases at the beginning of it.
3. Cash in on Cashback and Reward Points:
Festive seasons offer a multitude of credit card offers, including cashbacks and reward points. It’s important to note that not every purchase qualifies for these benefits, so avoid making impulsive buys solely for cashback. Before swiping your credit card, check if you have any existing reward/cashback points that can be used to maximize your savings.
4. Be Cautious with No-Cost EMI:
No-cost EMI may appear enticing, but it might hide the actual cost. Opting for a no-cost EMI scheme could mean missing out on discounts available for upfront purchases. To make an informed decision, calculate the actual cost and determine if you can afford the product at a discounted price without the EMI scheme.
5. Avoid Cash Withdrawals:
Credit cards are ideal for shopping, but they’re not the best choice for withdrawing cash at ATMs. This is because cash withdrawals through credit cards can result in substantial interest charges, often around 2.5-3% per month (varies by the bank). It’s best to reserve this option for genuine emergencies and refrain from using it for shopping. Unlike card transactions, cash advances do not come with an interest-free period.
6. Pay More than the Minimum Due:
On your credit card statement, you’ll find a minimum amount due, typically around 5% of your outstanding balance. Paying only the minimum amount can help you avoid late payment charges, but it will still incur interest on the remaining balance, usually ranging from 2.5% to 3.5%. While it might be tempting to pay the minimum during the festive season, it’s advisable to strive to pay the full outstanding amount by the due date to prevent accumulating more debt.
7. Limit the Number of Cards:
Many individuals possess multiple credit cards, and when not managed wisely, they can lead to financial troubles. However, when used with financial prudence, credit cards can be valuable tools for managing your finances effectively. To avoid temptation and overspending, select one credit card for your festive season expenses and stick to it, even if other cards offer tempting deals.
In a nutshell, the festive season brings joy and excitement, but it can also lead to overspending and financial regrets if you don’t use your credit cards wisely. By keeping the above tips in mind, you can make the most of your credit cards. Enjoy the season responsibly and avoid the post-holiday credit card blues.