With a long festive season around the corner, there is plenty of time to hop on to the shopping bandwagon. But how do you make the most of the mouth-watering deals, if you are cash-crunched?

There are usually three options to fund your purchases — credit cards, personal loans or consumer durable loans. So, which one should you opt for?

Swipe at your convenience

Many a time, we shop impulsively, as most of us are short of time.

In such instances, swiping your credit card is the best way to make your goody purchases.

If you are disciplined, it is also the most cost-effective way. When you swipe your card for the full amount, you enjoy interest-free credit, usually for over a month (based on your billing cycle).

But, of course, that’s provided your buying is well within your overall credit limit, and you are sure to pay back in full in the following month.

If not, your impulsive spending can cost you dear. Banks charge 2.5-3.5 per cent per month on credit card dues, which can amount to an interest rate of 30 per cent and upwards annually.

Ideally, swipe for an amount that you are fairly confident of repaying within your next billing cycle.

EMI conversion

You can convert your purchases made through credit cards into EMIs — in effect, you can shop in full and pay in parts. The main advantage of this option is that it offers you hassle-free finance, with no documentation.

Also, given that banks, with their tie-ups with various retailers, merchants and online sites, offer some chummy cash-back offers, it may also make sense to check out this option.

Hence, when you make your purchase, you can ask for your transaction to be converted into EMIs. If your card account has the required balance, the transaction is approved, and automatically and instantly converted into an EMI. This helps you save on higher credit- card interest.

But there are several costs and conditions attached. For one, banks charge you interest and processing fee on such loans. Your credit limit will be blocked for the loan amount, and each bank offers a specific tenure of 3-24 months. Also, you cannot avail yourself of this option in case of gold and jewellery purchases.

The period for which you want to get the loan and the rate of interest that a bank charges are key deciding factors here.

ICICI Bank’s instant EMI (on credit card) offers tenure option of 3-24 months, at a rate of interest of 13-15 per cent per annum.

If your loan tenure is short, despite the interest rate, this option would score over, say, a personal loan, which is offered by the bank at 10.99-22 per cent interest per annum.

But if your tenure is close to a year or more, opting for a personal loan may work out better.

HDFC Bank’s smart EMI comes with 1.5 per cent interest per month, so does Axis Bank’s EMI option.

Here again, choose to convert your credit- card purchases into EMI only if your duration is short. While ICICI Bank charges no processing fee on credit- card loans, HDFC Bank and Axis Bank charge 1-1.5 per cent of the loan amount or ₹150, whichever is higher.

Specific loans

If you are looking to buy specific white goods or electronic appliances such as refrigerators, microwaves or television sets, there is the option of taking a consumer durable loan.

Banks and non-banking finance companies tie up with particular dealers/merchants and offer consumer durable loans on specific products.

If you compare with personal loans, these loans may score over convenience, as the merchants and finance companies generally process the loans quicker. They also are easy on your wallet, as the ‘no-interest’ offers usually run through the year at certain retail outlets. However, do remember that processing charges are levied.

If you are looking for only a specific product, this option scores over personal and credit card loans.

No-cost EMI

Then there are a host of offers online from the likes of Flipkart and Amazon. These online players, along with banks, offer no-cost EMIs on credit-card purchases on specific products.

In effect, banks continue to charge you interest — only that it is deducted from the upfront purchase price.

For instance, if a mobile costs ₹40,000 on Amazon, and the interest charged to you on this for the credit-card loan is ₹869, you get an upfront discount on the cost of the mobile (similar to your interest). However, your bank may charge you GST and other taxes on the interest component of the EMI.

Above all, it is good to make prudent financial decisions. Be sure to keep a tab on your credit purchases.

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