With the festive season having kicked off, there are lots of discounts and offers everywhere. From offline stores to online ones, festive shopping is at a high.
While the festive season may be a good time to make that purchase you may have been eyeing for long, it also means you can find yourself shopping for goods you do not really need. Here’s what you can do to avoid that.
Spend within limits
Indulging in festivities is a given in any festive season. Amidst all the festivities and rituals, products and gift items may appear irresistible. Follow the simple principle of avoiding shopping altogether if you do not need something, irrespective of the festive discount on offer.
Even if you are using your credit card to make a purchase and are not paying instant cash, know that with interest rates as high as 35-40% you will be escalating the final price of ownership of your product if you do not repay within the interest-free period.
Careful with EMI option
You may get a discounted price for your purchase and also the option to pay in EMIs through your credit card. Yet, the purchase may not work out to be entirely cost efficient. Opting for monthly EMIs comes with a fee that escalates the overall price of your purchase. With card EMIs, not only are you paying a higher amount, any default in EMI payments will mean a late fine and penalty, increasing your final cost even further.
Avoid higher credit utilisation
Credit utilisation ratio (CUR) is the ratio between your credit card spending and spending limit available. If your limit is R100,000 and you are spending R50,000, your CUR is 50%. A CUR above 30% would be harmful to your credit score since your high levels of borrowing indicate a credit-hunger. Furthermore, if you spend a high amount and are late on repayment, not only will you be paying high interest rate but also further damage your credit score. This would make it difficult for you to take loans. Therefore, avoid maxing out on your credit card, and always use cash or debit card to control your spending.
Make repayments a priority
If you are in debt, the best thing to do is to ensure timely repayments. Do not keep ignoring the repayments or resort to paying just the minimum due amount each month. Pay more than the minimum due balance. Ideally, pay the entire balance and do not use your credit card till you’re out of debt.
Close high-interest debt
If the credit card debt is too high to plan an easy repayment plan, consider using your emergency financial corpus for repayments. The high interest on credit cards is only going to increase your overall debt if you delay repayment.
Use cash for purchases
Until you are debt-free, opt for only cash purchases for all your needs. A cash purchase can be a good deterrent for any unwanted and impulsive purchase, while you can also get the benefit of a cash discount especially when buying from brick and mortar stores.
In the festive season be a smart buyer to ensure that you do not fall into any debt trap because of impulsive purchases.