With the festival season already under way, you are likely flooded with offers and discounts, both online and offline. You may have already compiled a long list of items you plan to purchase during this season. However, amidst the joy and excitement, it’s easy to overspend on unnecessary items due to tempting offers, only to regret it later when your credit card bills start rolling in.

Overspending with credit cards and failing to pay your bills on time can result in disagreeable consequences. But fear not. With some prudent strategies, which we outline here, you can make the most of your credit card during the festive season.

1. Keep your Credit Utilisation Rate in check

Throughout the festive season, your credit card issuer(s) will extend special offers and deals to you. While it’s wise to take advantage of such offers, it’s equally important to monitor your overall credit card spending and keep an eye on your credit utilisation rate (CUR).

CUR represents the percentage of your total credit limit that you’re currently using. It’s generally recommended to keep your CUR below 30 per cent. Exceeding this limit may harm your credit score, reducing your eligibility for borrowing from lenders. If you find your CUR approaching or exceeding 30 per cent, consider requesting a credit limit increase from your card issuer or utilising alternative payment methods, such as a debit card, to maintain your credit score.

2. Leverage your Billing Cycle

While credit cards come with an interest-free period ranging from 20 to 50 days, understanding your credit card’s billing cycle is crucial, especially during periods of high spending. The billing cycle spans the last closing statement to the next one and typically lasts 27 to 31 days. If you start making purchases at the beginning of your billing cycle, you’ll have a lot of interest-free time to settle your dues.

Overspending with credit cards and failing to pay your bills on time can result in disagreeable consequences
3. Make the most of Cashback and Reward Points

Festive seasons are used to shower customers with credit card offers, discounts, cashbacks, and reward points. However, it’s essential to note that not every product is eligible for cashbacks and rewards, and cashbacks may only be available for purchases beyond a certain threshold. Avoid overstretching your budget by impulsively buying unplanned products solely for the sake of attractive cashbacks or reward points. In fact, before swiping your credit card, you should check if the card has existing reward/cashback points that can be monetised. 

4. Cautious with No-Cost EMI

Amid the tempting offers and cashbacks, the option that has captured consumers’ attention is no-cost EMI (equated monthly instalments) offered by merchants through your credit card. No-cost EMI schemes allow you to pay for a product in equal instalments without apparent interest. However, there’s usually a catch. By opting for a no-cost EMI scheme, you may miss out on discounts that would be available if you purchased the product outright. In essence, interest is incorporated indirectly into the scheme. Therefore, it’s essential to crunch the numbers and determine if you have the funds to buy a particular product at a discounted price without the ‘no-cost’ EMI!

5. Avoid cash withdrawals

Running out of money is a common thing, usually near the end of the month. Banks offer deals and discounts when you use your credit card for shopping, but these benefits do not apply when you withdraw cash using your credit card at ATMs. Cash withdrawals through credit cards can incur substantial interest charges, typically 2.5-3 per cent per month, which can vary from bank to bank. Reserve this option for extreme emergencies and avoid using it for shopping purposes. Do note, unlike card transactions, there is no interest-free period for cash advances and the interest will be charged from the date of the transaction till the payment is made in full.

6. Pay more than minimum due

After a festive spending binge, looking at the credit card statement is akin to a nightmare. The minimum amount due on your credit card is the smallest sum (usually around 5 per cent) you must pay by the due date. Paying only the minimum amount can spare you from late payment charges, but you’ll still be charged interest, ranging from 2.5 to 3.5 per cent, on the remaining outstanding balance. Although the temptation to pay the minimum amount might arise during the festive season, doing so can lead you into a debt trap. It’s advisable to strive to pay the full outstanding amount by the due date to avoid accumulating more debt.

7. Limit number of cards

Many have 3-4 credit cards. When handled imprudently, credit cards can easily become a fast track to debt troubles. However, when employed with financial acumen, the same can serve as a valuable tool to support your financial requirements and provide the essential breathing room you need to manage your finances effectively. Swiping or using all the credit cards at your disposal is a sureshot recipe for trouble. Choose one card for festive season spending. Track and spend through this card no matter how tempting the offers to use others.

Tips for smart spending
Follow your budget strictly
Keep CUR within 30 per cent
Spend maximum at the start of billing cycle