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This festival season of Navrathri and Deepavali holds out much excitement for consumers, coming as it does after two years of lockdowns and subdued celebrations, due to Covid. As we look to make up for all the lost time, this is also when purse strings are loosened without much thought.
But as you go on a shopping binge this festive season, there are still some old lessons to be kept in mind — about not going overboard. That means no instinctive buying of stuff you are unlikely to use, loading up on expensive gadgets that your current income cannot support, and borrowing heavily to fill your shopping cart .
Here are some ways to make the most of the opportunities while still maintaining desirable credit behaviour. We also explore some credit options such as BNPL (buy now pay later) and no-cost EMI and the hidden aspects of such schemes.
Make a budget, stick to it
Before buying stuff through online portals or retail outlets, draw a full-fledged plan of what you want to buy and the allocation towards such stuff, for instance, electronic gadgets, clothes, jewellery items, etc.
Separate needs from wants. For example, if you see yourself working from home for the foreseeable future, you would be better off going for an ergonomic chair and table, a laptop height adjustment device, or a better computer monitor, rather than splurging on the latest iPhone 14, which may be beyond your budget.
Ideally, you shouldn’t have to borrow for your shopping extravaganza, and must fund it through your savings or a part of your yearly bonus.
But if you do have to take a loan, ensure that your EMI does not exceed 20 per cent of your income, and doesn’t extend beyond three months, lest your other investment goals should get affected.
Do your research
Many times, we assume that we get the best deals only via the online e-commerce websites. This may not always be true. There would also be retail brick-and-mortar outlets that could be offering excellent deals on things that you always wanted to buy.
Newspaper advertisements usually give you a good idea on the discounts offered by popular outlets during the festive season.
The same device or gadget or furniture or dress may be available cheaper offline. Of course, this is not a certainty. But you must do your groundwork thoroughly before zeroing in on the right seller – online or offline.
Funding your festive purchases
During the festive season, financial services companies often offer no-cost EMI, discount on partner platforms/brands etc. Some banks also waive the processing fees or give concessions on loan applications.
BNPL (Buy now and pay later) is another option. Banks, fintechs and even e-commerce companies offer loans to consumers. Now, in most cases, BNPL does not have any joining fees or annual fees the way most credit cards do. BNPL is a system where the lender pays on your behalf and the borrower must pay within the stipulated time when the amount is interest free. The borrower has the option to pay either in lumpsum or in no-cost EMI, and if the borrower fails to pay on the due date interest is charged (upto 24 per cent).
Most credit card and BNPL players have ties with merchants and e-commerce platforms. For instance, there is Amazon Pay ICICI Bank Credit card whose reward points can be used to shop on Amazon and also “No Cost EMI” of three and six-month tenures. Then there is HSBC Cashback credit card which gives 1.5 per cent cashback on online spends, and cardholders can avail 5 per cent discount on Amazon on purchases of more than ₹1,000. Coming to BNPL these platforms tie up with merchants where there will be seamless checkout and offers also e.g., Lazypay has partnered with brands like Samsung, Boat and make my trip etc.
No Cost EMI
Merchants often claim to offer something called “No-Cost EMI” stating that no interest is charged on this credit facility, which sounds attractive. However, there is no free lunch. Interest is generally camouflaged and is charged under some other head. Usually, the discount on the product offered under “No-cost EMI” is not provided to the consumer while the merchant is paid discounted price and the balance is taken by the lender. Another way of doing it is by adding the interest amount to the selling price and passing it off as “No cost-EMI”. So, be cautious and do some research on whether a better deal is available somewhere else and take decision based on necessity and want.
Responsible credit behaviour
In case you decide to buy expensive stuff via your credit card, because of attractive features, discounts and cashbacks, you must still ensure that you repay the entire amount in full in the next billing cycle. You can allocate a portion of your bonus for this purpose. Do not roll over credit card dues as the interest rates are exorbitant, at 30 per cent a year.
No-cost EMIs or BNPL must not extent beyond three months, and these EMIs must not come at the cost of your regular monthly investments, insurance payments, etc.
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