During the holiday season and New Year, when most households wait to make new purchases until the official start of the festivities, consumer spending always soars. The use of credit cards too increases during the holiday season as a result of their many benefits and cost savings. But it is important to remember that to maximise your credit card benefits and avoid financial catastrophe after the holidays are over, you must use credit cards sensibly.
Here are some SBI cashback credit card usage blunders you should avoid making this holiday and New Year season.
Going over your budget when using credit cards
Overspending can occasionally result from the widespread belief that the holidays are a good time to buy, as well as a number of enticing offers and discounts on credit card purchases. For many consumers who overspend, paying back only the minimum amount owed—usually 5% of the total amount due—is an easy way out. They do not have to pay late fees as a result, but interest is still charged on the outstanding balance due to finance charges, which can total up to 48–49% p.a. of the bill amount outstanding.
If you find yourself in a situation where you have a lot of credit card debt that you are not able to pay off in full by the due date, think about converting your outstanding balance or any large purchases into installment payments. Installment payments, which are considerably less expensive than the high finance charges applied to outstanding dues, are permitted under this facility. The facility usually offers interest rates between 12% and 25% per year, with tenures ranging from three months to sixty months. Other options available to you Rather than just paying the minimum amount due each month to pay off your debt, think about leveraging your long-term investments through SBI cashback credit card balance transfers, low-yield investment sales, or secured loan utilisation. Not only do you maintain your long-term financial goals, but the interest rate is typically far less than what credit card financing fees charge.
Utilising credit card to frequently withdraw cash
When you use your credit card to make cash withdrawals, there is a fee called a cash advance that can be between 2.5% and 3.5% of the total amount taken out. Cash advances and withdrawals are additionally subject to finance charges from the time the money is taken out until it is paid back, unlike other credit card transactions. Consequently, this cash advance fee can really burn a hole in your wallet, especially if you use your credit card for frequent cash withdrawals, when combined with the high financing charges of up to 47–48% p.a.
Instead of using credit card cash withdrawals to satisfy your financial needs, think about using loans with quick disbursals, such as loans against credit cards, gold loans, loans against securities, or personal loans. The substantial financing costs and cash advance fees connected with credit card cash withdrawals are more expensive than the interest rates on these loans. Remember that using a SBI cashback credit card to withdraw cash shouldn’t be your first option. Make sure you return the entire amount as soon as you can if you must use your credit card for any reason.
Selecting an EMI period without considering the ability to repay
Credit card debt: EMI options usually range from three to thirty-six months. It’s important to think about your ability to repay the loan before deciding on the EMI period. Even with lower interest rates, longer tenures are still more costly overall for borrowers who are less able to repay their debt. Shorter terms can save total interest costs for borrowers with higher repayment capacity, but bear in mind that shorter terms also mean higher monthly installments (EMIs).
This raises the risk of any kind of default or delay in payments, especially when there are unanticipated costs or an emergency. Remember that how you repay credit has an impact on your credit score as well. Your credit score will gradually rise if you make on-time SBI cashback credit card debt repayments. As a result, both your eligibility and chances of obtaining credit in the future will improve. Therefore, be sure to take your ability to repay the outstanding balance into account when determining the length of your credit card installment loan. By doing this, you can lessen the possibility that you will forget payments.
Being ignorant of the special card advantages offered during holiday season
Some credit card companies give multiple rewards for purchases made during the Christmas season and new year in an effort to entice customers to use their cards more often. They work together with producers or merchants to provide a range of distinctive promos during the Christmas season. These rewards could include more products available on EMIs, bigger discounts in the form of cashbacks and instant savings, more reward points for holiday shopping, and other advantages.
Therefore, before making any purchases related to the holidays, make sure you are aware of the additional benefits provided by your credit card issuer. If you have multiple credit cards, compare the benefits and offers from each issuer and use the card that offers the best value for the items you wish to purchase. Also, if you already have accumulated many reward points, you can opt to convert SBI credit card reward points convert to cash,as this can help in paying the bill too when it gets adjusted in your statement.
Not checking other credit options before choosing credit card EMIs
Large purchases are frequently made during the holiday season, and a lot of credit card users opt to pay for these purchases with EMi SBI cashback credit card payments. Credit card EMIs normally have a term of three to six months and an interest cost of twelve to fifteen percent annually, though some credit card issuers offer a free EMI option. Before making big purchases with credit card EMIs, consider other credit options like personal loans, gold loans, or loans against credit cards. It’s a good idea to compare your credit options before using credit card EMIs for holiday shopping because lenders frequently offer lower interest rates and/or waive or reduce processing fees during this time of year.
Not utilizing your reward points wisely
Another mistake many users tend to often do is missing out on their credit card rewards’ redemption. Rewards are one of the big benefits that most cards offer in some way or the other, depending on their target audience, like travel cards, cashback cards etc. So make sure you convert SBI credit card reward points convert to cash before the rewards expire.
