Many credit card issuers enter into agreements with merchants to offer free IMEs on their services and merchandise. EMI options are offered on both online and offline channels.

The holiday season is considered a good time to shop for high value items, renovate homes, and give gifts to loved ones. As a result, those who cannot meet these expenses on their own resources have recourse to personal loans and various consumer credits to compensate for their shortfalls during the holiday season.

Let’s take a look at how your credit card can be used optimally to bridge the shortfall and manage your finances during the holiday season.

1. Improves credit score

Since credit card transactions are the same as taking out loans, repaying credit card dues on the due date has a similar positive impact on your credit score as any other type of loan. Unlike loans, there are no interest charges for using a credit card as long as you pay off your bills in full by the due date. This makes credit cards one of the most convenient and cost effective ways to build your credit score. All you need to do is ensure full refund of credit card dues on time and avoid spending more than 30% of your credit limit. Failure to do so can negatively impact your credit score, lead to high finance charges of around 30-49% per year, and affect your future loan and credit card eligibility.

2. Save Money With Many Credit Card Benefits

To attract shoppers during the holiday season, many merchants and retailers offer a wide range of benefits in the form of higher loyalty points, discounts, vouchers, cash back, and more. on credit card transactions. You should visit the offers section of your credit card and find the point of sale or online platform where these rebates and cash back are valid.

Even if you are not able to find such offers, using your credit cards for your holiday spending would accumulate the usual reward points. Also, since most credit cards have an expiration date for their reward points, try redeeming your accumulated reward points while making your holiday shopping.

3. Managing cash flow through an interest-free period

The interest-free period refers to the period between the date of your credit card transaction and the due date of the relevant billing cycle. During the interest-free period, credit card issuers do not charge any interest on transactions, provided your current credit card is paid in full by the due date. The interest-free period can vary between 18 and 55 days depending on your trade dates. So your credit card issuers fund your transactions for free, helping you earn a notional interest benefit. Those with multiple cards need to spread their large expenses across multiple credit cards so that they can benefit from a maximum interest-free period for each of those expenses.

4. Possibility to convert your big expenses into IME

It is quite common during the holiday season to have credit card expenses beyond its immediate repayment capacity. The best way to deal with this situation is to convert some or all of their credit card bills to IMEs based on their ability to repay. The duration of the EMI conversion can be up to 5 years, which allows cardholders to comfortably repay their contributions according to their repayment capacity at a much lower cost.

5. Availability of IMEs free of charge

Many credit card issuers enter into agreements with merchants to offer free IMEs on their services and merchandise. EMI options are offered on both online and offline channels. Interest charges incurred on free IMEs are borne by merchants while cardholders only have to bear the cost of purchasing through IMEs. A few card issuers also offer additional discounts to their credit card holders for making purchases through no-charge IMEs based on their link to the merchant / manufacturer.

6. Pre-approved loans for immediate fund needs

Cardholders with an excellent repayment history and excellent transaction history are typically offered a credit card loan by their card issuers. These are pre-approved loans sanctioned against the credit limits of cardholders. The “pre-approved” nature of these loans allows them to have one of the fastest disbursements of all credit options. Most card issuers usually pay out the loan amount on the same day you apply for the loan. Some card issuers also offer additional credit facilities to their selected cardholders with the loan amount exceeding their authorized credit limit. The availability of these pre-approved loans provides instant access to credit to cardholders to deal with financial shortages encountered for holiday spending.

(The author is director, Paisabazaar.com)