Various online marketplaces, including Amazon, Flipkart, Myntra, etc., have started their festival sales. There are huge discounts on offer from merchants, along with credit/debit card discount offers from banks. Such lucrative offers can tempt people to purchase some items that they may not necessarily need.
When such purchases are financed through personal loans or credit cards, they need to be repaid on time. Any repayment delays/defaults can spoil your credit score and report. In this article, we will understand how you can protect your credit score during the festive season.
Festive sales are surging
Several events have contributed to festive sales surging this year. Amazon, Flipkart, Myntra, and other online merchants have started their biggest annual sale during Navratri. During these sale events, many merchants offer their best deals with discounts going up to 50% or even higher. Banks are offering an instant discount of 10% on credit/debit cards. To sweeten the deal, during the Diwali festive sale event, banks are offering bonus discounts, depending on order value (slab-wise), over and above the base 10% instant discount.
Apart from credit card discounts, banks offer attractive EMI-based financing schemes, including personal loans, consumer loans, etc. Some personal loan offers include a discount on or the waiver of processing fees, lower interest rates, waiver of foreclosure fees, etc.
The Government has also played its role in boosting festive sales this year. The Government has reduced the GST rates on many items. With lower GST rates, the prices of many products have decreased, making them more affordable for a broader range of people.
The marketplaces, brands, and banks are following up their offers with huge marketing spends, so that customers don’t miss them. While all the above reasons are leading to festive sales surging, peer pressure is also playing its role in the case of some people. Just because their neighbour or colleague is carrying the latest gadget, they may also want to buy it, even though they can manage without it.
Steps to protect your credit score
Take advantage of credit card offers
We discussed how to build your “Festival Fund” and be ready with the money when the festive sale starts. During the festive sale, take advantage of higher discounts from merchants, credit card-based and bonus discount offers, etc. Apart from discounts, credit cards offer benefits such as reward points, interest-free credit period, complimentary airport lounge access, achieving spend-based milestones, etc.
Fund your shopping list purchase(s) with the credit card and make the most of the card-specific offers. However, ensure you pay the entire credit card monthly bill with the money you have accumulated in your “Festival Fund”. In this manner, you will enjoy the credit card benefits and pay the credit card bill with your accumulated funds. Paying the credit card’s entire outstanding balance before or by the due date will help you increase or maintain your credit score.
Evaluate personal loan offers
If you have not planned for your “Festival Fund”, you may need to go for a personal loan. Before finalising a personal loan, compare and evaluate the various personal loan offers available from different banks, NBFCs, fintechs, etc. During the festive season, various offers may be available, including a discount on or waiver of processing fees, lower interest rates, waiver of foreclosure fees, etc.
Choose a personal loan offer that best suits your requirements. Once you have taken a personal loan, ensure you make a provision for the EMI in your monthly budget. Paying the EMI before or by the due date will help you increase or maintain your credit score.
Track your spends during the festive season
You have created a budget for your festive spends and have started spending on your needs. As you spend, make sure to keep a record of your spends. Compare your actual spends with your budgeted spends. Tracking expenses ensures you don’t overspend and stay within your budget.
Financial check after the festive season
Once the festive season is over, do a financial check exercise. Compare all your festive spends with your budgeted spends. It will help you evaluate if you have stayed within the budget or overspent. If you have spent from your festival fund, check whether there is any money left in the fund. If you have used your credit card, check whether the entire outstanding amount has been paid.
If you have taken a personal loan, check whether the monthly budget has a provision for the EMI. If possible, set aside some money every month. A few months later, once you have sufficient funds, you can use them to foreclose the personal loan. A financial check after the festive season will help you evaluate whether you are in control of your finances.
Festive season spends can help you build your credit score
The festive season is one of the best times of the year to purchase that consumer durable, gadget, vehicle, etc., that you have been wanting/waiting to buy. Brands, merchants, and banks shower you with the best discounts and cashback deals.
Credit cards can help you save more with card-specific discount offers. Timely credit card bill payments can help you build/maintain your credit score. Similarly, if you have taken a personal loan, the timely EMI payments can help you build/maintain your credit score. Thus, you can use the festive season spends to your advantage to build/maintain your credit score and report.
On the other hand, if you spend on things you don’t need, it can compromise your financial health. Delays in credit card bill payments or personal loan EMIs can lead to a sharp fall in your credit score.
You must plan your festive season spends well in advance. On the one hand, you can save a lot of money with the discount/cashback offers. On the other hand, timely credit card bill payments or EMI payments can help you build/maintain a good credit score. A good credit score can be your gateway to getting new credit cards/personal loans in future, whenever the need arises.
Gopal Gidwani is a freelance personal finance content writer with 15+ years of experience. He can be reached on LinkedIn.
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