How to prudently use credit card during Diwali shopping:Find here what this financial expert has to say; learn 10 debt management tips additional precautions to take

Diwali festival feels incomplete without lights, sweets and shopping. During the festive season, there are abundant offers and discounts everywhere in the market. Most of these offers are available on credit cards. As a result, most people use credit cards for shopping. This makes payments easier and provides large amounts of cashback and rewards. However, sometimes people end up spending more than necessary due to this convenience. When the bill arrives, it becomes a headache. In such cases, the joy of Diwali fades away. Customers get trapped in a debt cycle, leading to anxiety and stress. In fact, proper use of credit cards can be very beneficial, while improper use can trap you in debt. Therefore, it’s important to exercise some caution while shopping and plan the budget in advance. Lets delve into following points: Question- How beneficial are credit card offers and what precautions should be taken while using those? Answer- During Diwali, credit card companies and banks offer attractive offers and discounts. These include cashback, no-cost EMI and bonus rewards. If you plan ahead and shop with a budget, these offers can help you do big shopping at lower costs. Although overspending in the lure of these offers is the biggest mistake. Let’s understand through the following graphics what precautions should be taken while using credit cards: Question- How much credit limit should you utilise while shopping? Answer- Using the entire credit limit is never wise. Experts believe that you should use only 30-40% of your total credit limit. This not only maintains your CIBIL score better but also makes it easier to pay bills. Question- Why should you avoid cash withdrawals via credit cards while shopping? Answer- Withdrawing cash from a credit card is the most expensive deal. Interest starts accumulating immediately, while shopping gives you a 30-50 day interest-free period. Additionally, withdrawing cash from ATM incurs a 2-3% cash advance fee immediately. Question- How much debt is considered excessive? Answer- An easy way to understand your financial health is the Debt-to-Income (DTI) ratio. This means how much of your monthly income goes towards paying loans or EMIs. If this portion is low then it’s fine, but if it exceeds 50% then difficulties may arise. Banks that provide home loans want this to remain below 36%. The second method is Credit Utilisation Ratio, meaning how much you are spending compared to your credit card limit. If you use too much of the limit, your credit score can be affected. Banks believe that credit limit usage should not exceed 30%-40%. Question- How much loss can you incur if credit card bill is not paid on time? Answer- If you don’t pay your credit card bill on time, banks charge annual interest up to 30-45%. This rate is much higher than any personal loan. Not only this, late payment charges and GST are added separately. Repeated delays will damage your CIBIL score, which can make it difficult to get loans in the future. Question- What smart steps can be taken to manage credit card bills after Diwali? Answer- You can adopt some methods to manage credit card bills after Diwali. To avoid credit card debt, first make a list of the entire month’s expenses. This will clearly show where money is being spent more than necessary. It is important to immediately put a brake on unnecessary expenses. If you receive a bonus or any extra income, use it directly for credit card payment. Set up auto-deduction to ensure bills are paid on time. And if possible, postpone shopping or luxury expenses until next month, so that the debt burden can be reduced quickly. Question- How can one avoid debt if spending exceeds requirements during Diwali? Answer- The first thing is to never spend beyond your means. This habit can trap you in debt. Credit card debt can lead you to bankruptcy. Let’s understand this through the following graphics: Question- When should you opt for credit card balance transfer and EMI option? Answer- Balance transfer should be taken when your bill is very high and you are not in a position to pay off the entire dues on one card. In such cases, you can transfer the balance to a card with lower interest rate. EMI option is suitable when the expense is large, but you can comfortably pay it off gradually in installments. Question- After recovering from credit card debt once, what mistakes should be avoided so that you do not fall into the debt trap again? Answer- To avoid increasing credit card debt, it’s essential to first create a budget so you can properly manage your income and expenses. Also, introspect on why you overspend. Try to make most payments in cash, and if you need to use a credit card, pay the full bill every month. Stop one-click buying and enter card details manually each time. Take at least 24 hours before making any purchase, and don’t pay immediately – this will help reduce your habit of unnecessary spending. ​