SHOP till you drop, enjoy huge
discounts, dhamaka deals, 50 per cent off, buy one get one free, get 10 per
cent cashback on X Bank credit or debit card, and many such enticing phrases
are seen across malls, stores, in various advertisements and on hoardings at
public places. With the festival season on, retailers, banks, non-banking
finance companies (NB-FCs), consumer durable manufactures, jewellery brands,
are all heavily advertising their special offers designed to entice consumers
to spend. Every year the festival season challenges us with obligations and
expenses. But follow these points this time:
Budget yourself
Ask yourself if you really need the latest curved UHD LED flatscreen or 3D
Smart LED flat screen worth several lakhs when you can easily continue with the
regular flatscreen you have at home. Buy only what is really required and not
because there is a discount being offered. Spending a huge amount on shopping
could take you a step down from your financial goals.
Read the fine print
While most banks have announced cashback offers on their debit and credit cards if they are used to shop online, the offers are not available on all their cards. For instance, Citibank is offering 10 per cent cash back on its credit cards on all purchases made at Jabong.com on October 8-15 but the maximum cashback per card is capped at Rs 1,000. Also the offer is not valid on its corporate card and ING white label credit cards. Let’s take another example, a promotional mail from Kotak Bank says that the bank is offering gift vouchers of Rs 50,000 if you shop online through net banking and are one of the top three customers (spenders) with the highest number of online shopping transactions. But the number of online transactions is capped at a maximum of 15 transactions per merchant in the entire offer period (October 9 to November 5).
While most banks have announced cashback offers on their debit and credit cards if they are used to shop online, the offers are not available on all their cards. For instance, Citibank is offering 10 per cent cash back on its credit cards on all purchases made at Jabong.com on October 8-15 but the maximum cashback per card is capped at Rs 1,000. Also the offer is not valid on its corporate card and ING white label credit cards. Let’s take another example, a promotional mail from Kotak Bank says that the bank is offering gift vouchers of Rs 50,000 if you shop online through net banking and are one of the top three customers (spenders) with the highest number of online shopping transactions. But the number of online transactions is capped at a maximum of 15 transactions per merchant in the entire offer period (October 9 to November 5).
The truth about 0% EMIs
Despite banks being stopped from offering zero per cent EMI schemes by the Reserve Bank of India, the schemes continue to be offered by non-banking finance companies (NB-FCs). Also retailers are entering into agreements with brands to offer these schemes. The interest cost on such offers paid through credit cards is being shared by retailers and manufactures. But the interest element is often camouflaged and passed on to customer in the form of processing fee. Also if you opt for zero per cent EMI scheme, you are not entitled to a discount or a gift which you get if you pay upfront. The RBI had observed that some banks were loading the expenses incurred in sourcing the loan (viz. direct selling agent commission) in the applicable return on investment charged on the product.
Says Pankaaj Maalde, a certified
financial planner, “In a zero per cent EMI scheme, the first instalment is
upfront and the EMI starts from the first month of taking the loan plus there
are processing fees attached to it. These are marketing gimmicks and not
beneficial to the customers. The RBI should also restrain NBFCs from offering
such schemes to customers.”
In case you are
converting the payment for what you have shopped into EMIs on your credit card,
credit card interest rates are the highest, ranging between 24 and 8 per cent
per annum. If you default, it would affect your creditworthiness. There are also
pre-payment penalties attached.
Home loans
There is no good or bad time for taking a home loan for the first time to buy
your dream house. So go ahead if there is a good deal offered. But if you are
taking a second home loan for investment purpose, then use the tax exemptions
and maximise your tax savings. A home loan taken on your first self-occupied
property is eligible for deduction for Rs 1 lakh of the principal amount under
section 80C and Rs. 1.5 lakh (revised now to 2.5 lakh in the latest budget) of
the interest paid under Section 24.
For a second home loan, only the interest payable is eligible for a deduction. But there is no limit on the deduction on interest paid for a second home loan if it has been given on rent. A second home loan can definitely help to save on your overall tax burden, and to ensure you can get the most out of your second property.
Car loan
Try to avoid taking a vehicle loan if you can draw on your own reasources. Use your own funds to buy the car if you are a salaried person. This is because there are no income tax benefits available on a car or any other vehicle loan. In case you are a self-employed person/ businessman, you can opt for a car loan because the interest becomes a chargeable item against your income.
Maalde explains why. “A car is not an asset and it also depreciates,” he says. “So consider buying a car only if there is a strong need. If you have fixed deposits, then use those to buy a car instead of taking a loan. FDs these days are earning interest of 7-8 per cent while your car loan interest rate would be 10.5-11 per cent.”
All in all, the idea of a discount should not lead to impulse buying as the realisation that you have been intemperate will dampen the holiday cheer.
falaknaazsyed@mydigitalfc.com
