Festive Season Shopping Guide: 7 Tips To Avoid Credit Card Debt 

Avoid falling into this trap by setting a budget based on how much you can afford to spend without jeopardising other financial commitments

To maintain your credit score, it is recommended to keep your credit utilisation to 30% of your total limit.

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The festive season is an exciting time that is eagerly awaited each year. With attractive discounts and offers on credit cards, this can be the perfect opportunity to tick items off your wish list. However, the temptation to save more with offers can lead to overspending, and consequently, debt. If you’re planning to wrap up your festive shopping with your credit card, here are some financial tips that can help you make the most of your credit card while avoiding debt. 

Stick to a budget 

Festivals are a time when brands go all out with enticing offers to attract customers. With discounts and deals everywhere, it is easy to get carried away and lose track of your spending and financial goals. Avoid falling into this trap by setting a budget based on how much you can afford to spend without jeopardising other financial commitments. Finally, make sure to pay your credit card bill in full and on time to avoid late payment penalties and interest charges. 

Track how much you’re spending

Most mobile banking apps allow you to set alerts that notify you of account activity in real time. During the festive season, it is easy to lose track of how much you’re spending. These alerts are a smart way to monitor your spending and credit limit in real time. This can help you stay within your available limit and keep your purchases to an amount you can afford to repay.

Avoid impulse purchases

Impulse shopping is something many of us may be guilty of during the festive season. Many brands come out with ‘limited time offers’ which can compel us to purchase things we don’t need. Many such purchases, even for small amounts, can add to your debt. To prevent this, create a wish list based on your needs and budget, and stick to it. 

Know your credit limit

For each cycle, there is a pre-set credit limit that you can borrow using your credit card. But, using it all up is not advisable. To maintain your credit score, it is recommended to keep your credit utilisation to 30% of your total limit. Moreover, using up your entire credit limit will leave you with a heftier bill to pay at the end of the cycle. If delayed, the bill will attract a late penalty and high-interest charges. Before commencing festive shopping, note down and track your credit limit to keep your utilisation under control and avoid falling into debt.  

Be smart with No-Cost EMIs

No-cost EMIs are offered by many banks and credit card issuers, especially during the festive season. This feature splits the cost of the purchase into smaller instalments that are spread over a few months, making the purchase affordable. If you are planning to purchase multiple items like mobile phones or home appliances on no-cost EMI, calculate if the EMI plans fit your budget for the coming months. Overcommitting to EMIs that you can’t pay will lead to financial stress and affect your credit score.  

Pay off your bill in full

Paying your credit card bill in full every month is among the most effective ways to avoid debt. If you make minimum payments towards your outstanding bills, interest will accrue on the outstanding balance, which can turn into a significant debt over time. Avoid this trap by clearing your full outstanding balance each month. 

Don’t spend only for cashback and rewards

Cashback and rewards are an inseparable part of credit card usage. During the festive season, many card issuers tie up with brands to offer exclusive deals by way of accelerated rewards, cashback, discounts, or vouchers. These rewards and offers can offset a certain part of your purchase and help you save money. But, chasing these deals without tracking your budget can lead to overspending. Remember to stick to your budget and avoid impulse purchases for rewards. 

The festive season is a time for celebration but should not lead to financial stress. Make the most of your credit card during this festive season by spending on a budget, making the best use of rewards and offers, monitoring your credit limit and spending, and making bill payments in full. 

The author is the manager, communications at BankBazaar. This article has been published as part of a special arrangement with BankBazaar.