Quick Tips: Does overspending with Credit Card during travel affect your credit score? | The Financial Express

Quick Tips: Does overspending with Credit Card during travel affect your credit score?

Overspending can be a major setback irrespective of credit and debit, and high utilisation of the credit limit can also result in a lower CIBIL score temporarily

Quick Tips: Does overspending with Credit Card during travel affect your credit score?
Overspending with a credit card during travel may impact your credit score temporarily. Representational image

Having a good credit score is a must to avail of cheaper loans. Experts say that the credit score does not just reflect the creditworthiness of a borrower but it is also a key component of his/her financial profile.

The credit score of a borrower shows whether he/she has a solid credit history or not. This in turn enables lenders to decide whether to extend loans to such borrowers or not and at what rate.

It is easy for persons with good credit scores to avail of loans. However, a person with a poor credit score finds it difficult to get a loan. Even if such a person gets a loan, the applicable interest rate is generally higher for him/her than for persons with good credit scores.

Also Read: Spending with travel credit card during year-end holidays: Key points to keep in mind

It is important for every person to maintain a good credit history and credit score. That said, there are various factors that affect the credit score of a borrower. One such factor affecting the credit score of a person is overspending. Therefore, while spending with a credit card during travel, one should avoid overspending.

Experts say that overspending may impact the credit score of a person temporarily. “Overspending can be a major setback irrespective of credit and debit, and high utilisation of the credit limit can also result in a lower CIBIL score temporarily,” says Gaurav Chopra, CEO & Founder of IndiaLends.

While planning a trip, it is good financial discipline to budget for miscellaneous expenses during the journey. Sometimes expenses can’t be avoided when travelling, so a credit card can be extremely helpful to provide that cushion.

Also Read: How can your credit card help you cut travel costs?

“However, one must assess their ability to pay back the credit card dues in time as carrying over balances on a credit card can come at prohibitive costs of 2.5% – 4% per month. It is often better to opt for a lower-cost personal loan to clear off high-cost debt on a credit card and pay off the lower-cost personal loan at one’s convenience,” says Chopra.

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First published on: 23-11-2022 at 09:04 IST