Although owning a credit card can get troublesome, it need not be.

Should you use your Credit Card to Buy Gifts this Christmas
Product Partner Friday, December 22, 2017 - 14:13

With Christmas around the corner, people splurge on buying gifts to celebrate the season of giving. Sometimes financially burdened by the obligation, people tend to utilize their credit card to purchase gifts. Some people, however, don’t like the idea of using their credit card and resort to spending cash or utilizing their debit card. The question therefore arises, is it harmful or beneficial to use your credit card to purchase gifts this Christmas?

Credit cards are often associated to being financial instruments that attract debt. Society reinforces its harmfulness and often drills the idea that they are not necessary for an individual. It should be acknowledged that the high rates of interest and the irrational need for the millennial generation to use money they do not have on products or services that are inessential, have indebted several people in the country. If you are the type of person who is capable of managing his/her finances and is also capable of refraining from using a credit card impulsively, it can be a boon to be using one, find a list of them in . In numerous instances, an individual can benefit more from spending on a credit card as opposed to purchasing goods or services via a debit card or cash. Using your credit card can benefit you financially, abusing it will lead you to the dark roads of debt.

Some of the benefits of using your credit card to buy Christmas gifts are mentioned below

Convenience – A credit card gives you the freedom to use money that you don’t have. If used wisely, a credit card is a loan with an affordable interest rate. It is only when you don’t make timely payments, overuse your limit, etc., that you are inconvenienced by the card. A credit card especially comes in handy in case of an emergency, for example. Still, one must understand and prioritise the spends made on his/her credit card.

Low interests – Credit cards do have a high rate of interest if you don’t pay off the spends on time. However, if you do pay back the loan within the specified period, you pay little to no interest on your purchases. However, this depends on the type of card you use, the policy of the card provider, and the duration in which you have paid back the credit. It should be noted that credit cards usually have a monthly rate of interest. Therefore, the longer you take to pay off the due amount the more the interest payable on the same.

Purchase protection – In many cases, disputes you have incurred during a purchase will be handled by your credit card company. For example, credit card companies will dispute against a merchant if he is unwilling to take back a defective product. Feel free to connect with your credit card company in case you are faced with an issue in future. More often than not, they will help you settle your dispute.

Sign-up bonuses – Numerous credit card establishments provide various offers upon acquiring a credit card with them. Companies are getting imaginative with the hand-outs they are providing to their customers. From reward points, vouchers, gift bags, companies are almost obligated to gift their customers due to the immense completion in the credit card market. A little bit of research before obtaining a card can be the difference between acquiring a gift along with the card and going home empty handed. But one must always keep in mind not to opt for a credit card with an interest rate of 45% p.a. simply because they are giving you a gift voucher worth Rs.250.

Cashback and reward points – As mentioned earlier, companies that provide credit cards are getting innovative in rewarding their customers. Most credit card companies offer reward points and cashback to their customers. Cashback is an offer provided by credit card companies when they promise to return a certain amount of money you have spent on the card after a specified limit. And reward points are similar in the sense that points get accumulated to your card each time you use your card, and these points can be used to avail gift vouchers, receive air miles, get discounts on spends from specific stores, etc., depending on the type of card you own.

Safety – Often times, paying for your purchases with a credit card is much safer than paying by cash or debit card. In the occurrence of fraud, you can simply contact your card company and they will reverse the payment in most cases. On the other hand, debit cards are not as secure, and paying by cash for a defective product, for example, will have to be sorted out by yourself.

Improving your credit score – Using a credit card responsibly can also help improve a bad credit score. The credit history with your credit card will be provided to a credit bureau. This information is then equated to a number between 300 and 900. The higher the number, the better your credit score. Using your credit card responsibly by making timely payments, not overusing your limit, etc., will have a progressive effect on your credit score and can help improve your credit score within less than a month.

Debt transfer – In case you have a high interest loan, it can be transferred to a credit card for a lower interest rate depending on the interest rates provided by the card company. Although useful, you should always work out all the costs involved in transferring debts before you decide to do so.

EMI facility – Most retail stores and online e-commerce platforms offer Equated Monthly instalment facility if you wish to purchase anything using your credit card. In case of a large purchase, you do not have to pay the entire amount all at once. You can split them into monthly instalments. Moreover, the EMI options provided by merchants and online e-commerce platforms usually provide a much cheaper interest rate than your credit card.

Tips to eliminate the adverse effects of a credit card.

By being cautious and smart about how you use your credit card, most of the drawbacks related to it can be avoided. Mentioned below are tips on how one can evade the adverse effects of using a credit card.

  • Recognise the conditions and charges of your credit card so you are completely conscious of all the hidden costs, if any. Do not resort to simply grabbing a card that a bank offers simply because you bank with the credit card company. If you haven’t read the fine print, you are likely to suffer the financial consequences because of it. Usually, the rate of interest on a card varies from company to company. Reading the fine print can help you save money on interest.
  • If you are not monetarily capable to pay off the money used from your credit card, do not use it. Stick to a limit you have set and do not exceed it irrespective of how badly you wish to use it. However, use your judgement wisely. In case of a financial emergency, feel free to use your card. But remember to pay back the amount on time.
  • Preferably, your expenditure should not be exceeding more than 40% of your overall credit limit. Staying within this limit will not only simplify the payment process, but will also safeguard your credit score.
  • Always choose the Equated Monthly Instalment option, if available, while making purchases using your credit card. As mentioned earlier, the interest on the EMI option offered by merchants and e-commerce site are much cheaper than that of your credit card. So, unless you are the type of person who was tremendously worried during the demonetization, opt for that EMI option.
  • Keep your card at home after that fight with your spouse or girl/boyfriend. Do not impulsively purchase using your credit card. Always use it only for planned purchases.
  • Do not miss a card payment at any cost. This will drastically increase the rate of interest payable towards the spends on your credit card. In addition, always try to pay off your card in full.

Although owning a credit card can get troublesome, it need not be. Following the tips mentioned in this article and using your card wisely can go a long way. At the end of the day, how you use the card can be the difference between indebting yourself to the point of no return and owing a modern day loan-vending device at the tip of your hands. Use it, Don’t abuse it!

This article has been produced by TNM Marquee in association with BankBazaar.