Credit Card Or Consumer Loan? How To Borrow Smartly For Festive Shopping

By Adhil Shetty | September 19, 2017

The festive season has arrived with a high shopping spirit for most. Many buyers have been smart enough by timing their purchase to make the most of the discounts as well as loan offerings by banks or Credit Cards.

Credit Cards offer reward points, cash back offerings and conversion of purchases into easy EMIs. Loans are provided for consumer durables with interest rates as low as zero percent at times to entice customers to get into installment payment mode.

Let us analyse which of the two can offer you more benefits as a buyer.

Credit Cards for Your Festive Shopping

Exclusive Discounts And EMI Purchase Option: As a consumer, you can use a Credit Card to not only get an exclusive discounted deal but can also grab an EMI deal ranging from 3 to 9 months or even 12 months. The exclusive discounts, however, can be limited to a particular retailer or bank Credit Card and not applicable to all cards. For EMI option, banks charge a processing fee and a surcharge for facilitating EMIs through a Credit Card purchase, thus escalating the overall cost of the purchase.

Cash Back And Rewards: Credit Cards come with lucrative cash back offers and reward point schemes in the festive season to make the purchase more attractive. You can avail either a predetermined percentage of cash back (usually 5%) into your Credit Card account or accumulate reward points to avail offers at a later stage. Cashback schemes, however, can also lure impulsive buyers to make an unnecessary purchase that can dent the financial well-being in the event of any missed payments.

The World Of Consumer Durable Loans

If you are one of those waiting for festive season deals to make a purchase, opting for consumer durable loans is another worthy option to consider. The quantum of charges for such consumer durable loans is lower than Credit Card charges making them a more pocket-friendly option. What’s more? Non-banking financial companies or NBFCs collaborate with various retailers and brands to offer easy consumer durable loan offers in the festive season.

Advantages And Disadvantages Of Consumer Loans And Credit Card Loans For Festive Shopping

Minimal Documentation: Both consumer durable loans and Credit Card loans require minimal documentation.  This makes both a popular option with a large number of buyers. KYC details, a cheque for the payment of first EMI and repayment mandate are the core essential documents required for a consumer durable loan. Credit Card EMIs may get approved via a call/email.

Highly Affordable: The interest rate offered by consumer durable loans, especially in the festive seasons, can be highly lucrative. Some banks or NBFCs even offer a 0% EMI option while charging a loan processing fee upfront making the loan pocket-friendly. Credit Card loans, however, come with interest. But most cards do not take processing fee.

Credit Cards versus consumer durable loans at a glance

  Credit Card Consumer Durable Loan
Availability Need a Credit Card with sufficient credit limit Can be availed by any individual between 18-65 years of age  – subject to eligibility criteria
Interest rate 2-3% per month Comes with 0% interest rate plus processing fee
Purchase potential Can be used for any product Applicable to limited products as approved by the bank or NBFC
Loan or purchase limit As per Credit Card purchase limit Up to Rs. 5 lakhs on an average for preselected products
Cash back and reward benefits Yes! But late payment can lead to a debt trap attracting high-interest rates and fines No such benefits

 Both the borrowing options come with their set of advantages and disadvantages. It is, therefore, wise to understand them before the shopping binge this festive season.

BankBazaar is a leading online marketplace in India that helps consumers compare and apply for Credit Cards, Personal Loans, Home Loans, Car Loans and insurance.

All information including news articles and blogs published on this website are strictly for general information purpose only. BankBazaar does not provide any warranty about the authenticity and accuracy of such information. BankBazaar will not be held responsible for any loss and/or damage that arises or is incurred by use of such information. Rates and offers as may be applicable at the time of applying for a product may vary from that mentioned above. Please visit www.bankbazaar.com for the latest rates/offers.
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About Adhil Shetty

Adhil Shetty is the Founder and serves as the Chief Executive Officer of BankBazaar.com. Adhil has a Master’s degree in International Relations with a specialization in International Finance and Business from Columbia University in the City of New York, and a Bachelor’s degree in Engineering from the College of Engineering Guindy, Anna University. Adhil is an expert in Personal Finance (Car loan/Home loan and personal loan) and he majorly consults on investment and spends rationalization for the Indian loan borrowers. His guidance is number based with real time interest rate calculations and hence useful for consumer’s real time query.

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