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Diwali shopping: Follow these six steps to spend smartly and avoid debt traps

Cashbacks on cards look attractive, but they usually have an upper limit or minimum purchase amount threshold

November 03, 2021 / 05:11 PM IST

Diwali is here, and the very thought of the festival gives us happiness. Shopping offers have been around since the Ganpathi festival and through Navaratri, in some form or the other. So, offers are in full swing on e-commerce websites: Amazon, Flipkart, Reliance Digital, Tata Cliq, etc. Offline outlets and retailers have also laid out the red carpet for customers, with discounts and cashbacks that you just can’t refuse.

Here’s how you can maximise the gains, and minimise the impact on your wallet while shopping this festive season.

Make a budget and stick to it

A big part of smart shopping is avoiding impulsive spending. Make a budget and track the shopping expenses during the festive time. Expenses up to 5 percent of the monthly income on festive shopping is an appropriate range.

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“You can decide to overspend by 10 percent of the budget, but make it up by having no splurging periods after the festive season,” says Mrin Agarwal, Financial Educator, Money Mentor and Founder of Finsafe India.

Decode the shopping offers

There are multiple shopping offers during the festive season from e-commerce websites and retailers, to gain the customer's attention. Some of the popular shopping offers are Buy 2 and Get 1 free, earning cashback, bundled freebies on purchase of big-ticket consumer electronics, etc. Understand such offers in detail before deciding to shop.

“Track the price before the sale to see if you are actually getting a good discount. Also, compare the prices on multiple e-commerce websites before buying a product,” says Adhil Shetty, CEO of BankBazaar. Check whether the deep discounts offered are on the old model for consumer electronics or outdated clothing line to clear their stock.

Explains Shetty, “Cashbacks look attractive, but they usually have an upper limit or minimum purchase amount. So, the cashback may be for 10 percent at a retail outlet, but the maximum cashback may be limited to Rs 2,000.” For instance, if you spend Rs 20,000, you get a 10 percent cashback, but if you spend Rs 40,000, you actually end up getting only 5 percent as cashback. So, spend wisely after doing some math. “Similarly, bundled gifts are useless if they are things you don’t need or use or if they come at the cost of the discount you may get otherwise,” says Shetty.

Also read | Diwali shopping: Splurge a bit, but compensate with more investments

Ask for a deep discount while shopping from a retailer

While shopping from a physical retailer, you get to see the product demonstration and comparisons with other brands in the store. You also understand warranty terms, etc. The biggest advantage is that you get to negotiate on the price. “If you negotiate hard on a product of your choice, there is additional 10-15 percent discount on the platter for customers,” says Raj Khosla, Managing Director and Founder of MyMoneyMantra.

In case you have a big ticket purchase in mind, consider it shopping from a retailer and negotiate the deal. Then compare it with e-commerce websites before making a payment. “My advice would be to study the offer, understand terms and conditions in mode of payment you opt for, negotiate the price with the retailer and you will get fantastic deals,” says Khosla.

Examine zero-cost EMI schemes closely

Now, retailers and e-commerce websites are offering  zero-cost EMIs (equated monthly instalment) on purchases of consumer electronics, readymade garments and multiple other products. No-cost EMIs can help you manage your cash flows, but they may not always be ‘no-cost.’ “You may have to pay a certain amount upfront. There may also be additional processing fee, which may actually increase the total cost of the product,” says Shetty.

Like any other loan, buying a product on no-cost EMI needs to be repaid on time in full. In case that does not happen, it can affect your credit score and bar you from accessing further credit. “You should avail a zero-cost EMI only if you cannot make a cash purchase,” Khosla says.

Also read: UNI Pay 1/3rd card review: Should you apply for it?

Stay away from 'Buy Now, Pay Later' schemes

A ‘Buy Now, Pay Later’ (BNPL) scheme is a personal loan given by a fintech firm to consumers. In this scheme, all the purchases during a billing-cycle get added up, and you can pay later. Fintech firms give additional discounts, cashback offers and loyalty benefits to gain your attention.

While most BNPL schemes provide an interest-free period of 14-45 days to make the repayments, the EMI options come with added interest in certain cases. You should be careful while using such credit facilities this festive season. Be ready with the money before the repayment due date, once the bill is generated. In case of delayed payments, Flipkart Pay Later scheme charges late fees of up to Rs 600 and there is convenience fee of up to Rs 475 for partial payment and amounts carried forward to a subsequent month. There are similar charges from other fintech firms offering BNPL scheme.

There are numerous first-time borrowers getting into debt traps because of availing such easy finance schemes offered by fintech lenders while shopping. Aparna Ramachandra, Founder Director of rectifycredit.com warns, “Consumers must know before borrowing that all these fintech lenders are providing personal loans by packaging them in different ways which are expensive and unsecured.”

Use co-branded credit cards to get additional offers and rewards

If you often shop from Flipkart or Amazon, then using the co-branded credit card of partnered banks will give you more discounts, cashback and rewards. These days many big-ticket electronic products such as smartphones have tie-ups with some banks credit cards that offer handsome cashback and discounts. However, there are things you need to keep in mind. “Stay under the 30 percent credit utilisation rate while shopping through credit cards and repay in full during the interest-free cycle,” says Shetty.

While shopping for Diwali, redeem your credit card reward points accumulated during the year. Check your bank’s shopping points to buy gifts for your loved ones or for yourself. “Also, check if you can use loyalty points or discount coupons for additional benefits while shopping with debit or credit cards,” says Khosla.
Hiral Thanawala is a personal finance journalist with 9 years of reporting experience. Based in Mumbai, he covers financial planning, banking and fintech segments from personal finance team for Moneycontrol.
first published: Oct 29, 2021 10:05 am

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