As the holiday season approaches with students’ summer vacation nearby, the wave of increased consumer spending comes with it. Due to the vast number of advantages and discounts that credit cards provide, this increase in spending is also accompanied by an increase in credit card usage. Here, it is critical to use credit cards and uni cards responsibly in order to reap the maximum benefits from them so that you do not end up damaging your financial situation once the holiday season is over.
So, the following are mistakes you must avoid when using your credit card during the holiday season.
Spending in excess of your ability to repay
The widespread perception that the holiday and the festive season is a great time to make new purchases, along with a plethora of lucrative offers and discounts on credit card purchases, can lead to overspending on holiday shopping in some cases. This season also witnessed high demand for uni card apply amongst new customers looking to avail offers.
But, when consumers spend more than they can afford to repay on cards, a simple solution that many choose is to pay only the minimum amount required, which is often 5 percent of the entire outstanding amount. Despite the fact that they will not be charged a late payment fee, the remainder of the outstanding bill amount will continue to accrue interest in the form of financing charges, which can reach as high as 47-48 percent p.a. in some cases.
To avoid stacking up uni cards debt that you will not be able to pay off in full on or before the due date, consider converting your outstanding balance or certain large-ticket purchases into monthly instalments (also known as instalment payments). A credit card with this facility allows the cardholder to convert the entire outstanding balance into a series of monthly instalments with tenures ranging from three months to sixty months and an interest rate of 12 percent to 24 percent per annum, which is significantly lower than the high finance charges levied on outstanding balances.
There are a variety of other possibilities available to you for avoiding uni cards debt. You can go for a credit card balance transfer, liquidate low yield investments or leverage your long-term investments with loans against securities, as the associated interest cost is typically much lower than the finance charges levied on credit cards and your long-term financial goals are not jeopardized in the process.
Making a cash withdrawal with a credit card
When you make a cash withdrawal using your credit card, you will be charged a cash advance fee that can range from 2.5 percent to 3.5 percent of the amount you withdraw. Furthermore, unlike other transactions made with your credit card, cash withdrawals/advances are subject to finance costs from the date of the withdrawal until the date of repayment, which is a significant disadvantage. Because of this, when combined with high finance costs of up to 47-48 percent per annum, cash advances from credit cards can burn a hole in your wallet, especially if you make cash withdrawals from your credit card on a regular basis.
As an alternative to making a cash withdrawal using your uni cards, you might want to consider meeting your financial obligations through loans that provide quick disbursements, such as a loan against your credit card, a gold loan, a loan against securities, or a personal loan, because these loans have lower interest rates in comparison to the high finance charges and cash advance fees that are levied on credit card cash withdrawals. Keep in mind that making cash withdrawals from your credit card should always be your last alternative, and even if you find yourself in this situation, be sure to refund the entire amount as soon as you are able.
Choosing an EMI tenure without taking repayment capability into consideration
When you go for a uni card apply, don’t forget to check the EMI feature. The EMI facility on them and credit cards is often available for terms ranging from three months to three years, depending on the card issuer. In order to determine the length of your EMIs, it is necessary to take your repayment capability into consideration. However, while people with a lower repayment capacity can benefit from a longer loan term because it results in lower monthly payments, the overall interest cost is higher in the case of a longer loan term. However, those who have a higher repayment capacity can choose shorter loan terms in order to save on overall interest costs.
However, keep in mind that because a shorter loan term implies a higher EMI amount, the likelihood of experiencing any form of delay or default in making such EMI payments is high, particularly in the event of an unexpected expense or financial exigency. It’s important to remember that your credit repayment habit has an effect on your credit score as well. Paying your credit card bills on time over time will gradually establish a solid credit score, which will boost your eligibility and approval prospects for credit in the future. To avoid defaulting on your outstanding debts, make sure you factor in your payments capacity while determining the length of your credit card EMI’s tenure.
Not being aware of unique rewards for spending money throughout the holiday season.
With the goal of increasing consumer spending on credit cards, several credit card issuers are attempting to incentivize users and drive them towards uni card apply by offering a plethora of rewards on purchases made over the holiday season. They partner with merchants and manufacturers to offer a wide range of special incentives to customers over the holiday season. These incentives may include substantial discounts in the form of cashback and quick discounts, additional reward points for spending money over the holiday season, the availability of more products on EMI, and so on.
As a result, before making any purchases during the holiday season pr taking the decision to go for a uni card apply, make sure you are aware of any additional benefits that may be available through your credit card issuer. If you have multiple credit cards, examine the offers and rewards being offered by your card issuers and utilize the uni cards for offers that reap the most rewards and help maximize your benefits and savings.