Offers on the card

Did you miss Amazon’s “Great Indian Festival” and Flipkart’s “Festive Dhamaka Days” sales that ended last week? Don’t fret. There are other options that can help you save some money on festival purchases, especially if you are going to use your credit or debit card.

Many leading banks such as State Bank of India (SBI), ICICI Bank and HDFC Bank have festival offers on purchases using their credit and debit cards. This is done by having a tie-up with specific retailers for both online and offline sales. Since these offers are not widely publicised, you can visit the bank’s website to find those that are currently available on the credit or debit cards owned by you.

What’s on offer?

The festival offers on cards come in two forms. First, as cash-back offers and the second as additional discounts on prices, over and above the regular festival discounts provided by the sellers.

The festival offers in the form of discounts on purchases can be availed of immediately at the time of shopping. But in case of cash-backs, the actual realisation of the offer happens with a lag. It varies across service providers and the time period for receiving the money ranges from a month to about three months or even more in some cases. For instance, ICICI Bank offers a 10 per cent cash-back on its credit and debit cards for purchases at Peter England outlets. The minimum purchase should be ₹3,500 and the maximum cash-back is capped at ₹750 per card, which will be credited on or before January 31, 2019.

Apart from the cash-backs and discounts, there is a third category of offer — additional reward points for specific purchases through credit cards during the festival season. But this is offered only by a few banks such as HSBC and HDFC Bank.

HSBC gives five times more reward points compared to the normal ratio, for purchases above ₹50,000 made through the Infibeam website. Similarly, HDFC Bank gives 10 times more reward points for spending through their credit cards towards apparels and electronics, including mobile phones. But the minimum purchase should be ₹5,000 and the transaction should be done in the “Happy Hours”, between 5 pm and 9 pm on any day.

Who is offering?

What can you buy in these festival offers? The options vary from apparels to home appliances, electronic goods and mobile phones. For gold-lovers, these offers are available on jewellery as well.

Reliance Trends, Pantaloons, Westside, Max, Marks & Spencers, etc are some of the leading apparel stores that have tied up with banks such as ICICI Bank, SBI, Axis Bank and offer cash-backs and discounts on purchases using their cards. Barring a few cases, the offers on apparels are available in all outlets of such retailers.

For electronic goods, home appliances, etc, Croma and Reliance Digital offer 5 per cent cash-back on a minimum purchase of ₹10,000. HDFC Bank’s credit or debit card can be used in Croma for availing of a cash-back of up to ₹2,000. Jewellery from Tanishq can be bought at a 5 per cent discount using a HDFC credit or debit card. The maximum discount could be ₹2,500 for purchases between ₹50,000 and ₹1 lakh and ₹5,000 for purchases over ₹1 lakh. For more details see table.

Limitations

Though many of these cash-back offers are available at all the outlets of retailers that have tied up with the banks, there are a few restrictions. For instance, SBI’s 5 per cent cash-back offered on purchases made at Pantaloons’ outlets is not applicable on stores located in the eastern region of the country. Similarly, ICICI Bank’s 5 per cent cash-back offered at Reliance Trends is not available in nine states that includes Assam, West Bengal, Bihar etc

Secondly, an individual has to purchase for a minimum value, as prescribed by the bank, to become eligible for the offer. Also, there is a cap on the maximum amount that can be availed of in the case of cashback offers.

Axis Bank, Kotak Mahindra Bank and Citibank give a cash-back of 5 per cent on purchases made with their credit cards at the Reliance Digital outlets. For this, the minimum purchase value at Reliance Digital should be ₹10,000, that too in a single transaction and without clubbing different bills. The maximum cash-back that can be obtained under this offer is ₹2,000.

When it comes to discounts, be alert while making the payment, and intimate the billing desk about the eligible card used. This will help the store employee incorporate the discount in the bill.

Thirdly, all these festival offers are applicable only for retail cards, almost in all cases. Special cards like corporate, commercial and those with special features are not eligible for these festival season offers.

Also, make sure you go through the detailed terms and conditions on the respective bank websites while trying to optimise your card purchases.

Precautionary measures

An individual’s spending spikes during the festival season, which is often unavoidable. A credit card, if available, becomes the most preferred mode to bridge the gap between the additional festival spending and funds available. Indeed, credit card is the best option as you get an interest-free credit if you can repay within the time given by banks, ranging from 20 to 50 days.

But this can turn out to be a bad option if you fail to pay back within your credit card bill cycle. Here are some factors you need to keep in mind while using credit cards, especially at times of increased spending during the festive season.

Interest cost can bite

The interest levied for non-payment of dues within the given credit-free period is quite prohibitive. It ranges from about 2.5 per cent to 3 per cent per month or even higher, which translates to 30-40 per cent or even higher per annum. This charge is termed as the annual percentage rate (APR).

So do not use the credit cards for the incremental spending just for availing the festival offers. If you fail to repay within the prescribed bill cycle, the interest cost will be much higher than what you might have saved on offers.

Minimum payment not enough

“Minimum amount due” is one segment in credit card bills that catches the eyes whenever the payment amount exceeds the normal spending limit of every month as in case of festival season.

The minimum amount due can give comfort to your eyes but not to your pockets. It is calculated as a percentage (in general 5 per cent) of the total outstanding bill amount. That is, if your outstanding bill amount is ₹10,000 in a month, the minimum amount due will be ₹500 (5 per cent of ₹10,000).

There is a misconception that interest cost will not be levied if this minimum due amount is paid. Not so. The APR will be charged for the balance to be paid and will be included in your next bill cycle. Interestingly, this APR will be calculated from the transaction date itself and not from the bill payment due date. So paying just the minimum amount due will only increase your bill amount every month and the cost of interest. So, getting carried away by seeing the minimum due amount, which will be affordable, will land you in a debt trap.

An eye on credit utilisation

Paying only the minimum amount due will also increase your credit utilisation ratio (outstanding balance divided by the total credit limit). If your credit card limit is ₹1 lakh and the outstanding balance to be paid is ₹30,000, then your credit utilisation ratio is 30 per cent (₹30,000 divided by ₹1 lakh).

In case you have more than one credit card, the outstanding balances on all the cards are added and divided by the sum of all credit card limits to arrive at the ratio.

A higher utilisation ratio has a negative impact on your credit score. Credit utilisation ratio is one of the most important factors in the credit score calculation and it is given 30 per cent weightage.

Maintaining a 30 per cent ratio is optimal for getting a high credit score. In any case,, it is ideal to keep the utilisation below 50 per cent.

The festival offers on credit cards can save you money. But don’t over-spend on your card unless you can repay within the interest-free period.

Else, the short-term happiness from the celebrations will turn out to be a long-term financial burden after the festival season.

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