October 19, 2022
Listen to Should you buy a smartphone on EMIs credit cards this Diwali?
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We all aspire to buy trendy accessories and the latest appliances on the occasion of Diwali. Especially since the demand for the latest smartphones increases dramatically during the festive season. As the perennial Indian consumer market is huge, online and offline merchants offer many lucrative offers during Diwali. Moreover, banks and non-bank financial companies also offer various offers such as consumer durable loans, credit cards EMIs, no-cost EMIs, instant personal loans, Buy Now Pay Later, etc., which makes purchasing expensive products and services seem affordable. Cost with small businesses. The amount of the monthly installments. If buying a high-end smartphone is high on your wish list but out of your budget, then you must have considered buying it with an EMI credit card or another similar option. But is it really an affordable option? Should you buy a smartphone on EMIs credit cards on Diwali? This article will answer all your questions.
Despite the fact that smartphones can be expensive and unaffordable, people still buy them and are financially burdened. Most of the e-commerce websites, like Amazon, Flipkart, etc., as well as traditional stores, like Croma and Vijay Sales, among others, offer high-end smartphones on easy EMI through credit cards and other credit facilities. Among all, EMI credit cards are very popular as you do not have to do any formalities like submitting personal and income details, submitting your documents, downloading a credit application, etc. Moreover, credit limit is already available on your card and therefore there is no need to check your credit score. EMI credit card offers are vigorously promoted during Diwali to attract customers.
Here are some of the benefits of buying a smartphone with EMIs credit cards on Diwali:
1. Special Deals:
Many online and offline merchants offer massive discounts on smartphones if you choose the EMIs credit card option. For example, Amazon is offering an instant 10% discount of up to Rs 10,000 on purchases made with Citi Bank and ICICI Bank debit cards, credit cards and EMIs.
2. No Cost – EMIs:
Due to the intense competition during the festive seasons, many sellers offer zero-cost EMI loans for up to 6 months. With this offer, the interest amount is returned to you in the form of cashback. The second offer is Low-Cost-EMIs, where a very small amount of interest is deducted from your purchases. There are other offers like discounts on processing fees, etc. So, Diwali is the best time to avail these offers as you do not have to pay a huge amount in interest to avail the EMI facility.
3. No need to wait
Thanks to the convenience of low EMIs, you can own that smartphone you’ve been looking forward to for so long. So, you get the product when you want it without waiting until you save enough money for it.
While credit card EMI facilities offer many advantages, they also have certain disadvantages:
1. High rate of interest:
If you choose EMIs credit cards with no cost EMI offer, you will have to pay a huge amount on interest. The interest rate usually ranges from 13% per year to 28% per year depending on the terms and conditions of the credit card company. Even if you choose no-cost EMIs or low-cost EMIs, the bank or NBFC will somehow charge you additional amount like high processing fees, no cash discounts, no promotional gifts, etc., that you could have benefited from.
2. Higher cost:
Although the purchase cost is mainly determined by the interest rate the lender charges you, other factors also contribute to the cost of your loan. When you take advantage of the credit card EMI option, most credit card providers will charge you a large amount in processing fees. On top of that, sellers offer you a lower amount of equal monthly installments that you will have to pay, making smartphone and loan seem affordable. However, you end up paying a lot more than you would with regular cash for a smartphone.
3. Monthly burden:
If you frequently choose credit cards EMIs on your purchases, it will be a monthly financial burden on you. This will be an additional fixed monthly expense that you cannot avoid until it is paid in full. This can become very stressful if your budget is limited.
While purchasing anything through a credit card EMI facility, it is important to calculate the expected life of the product. Consumer durables, especially smartphones, depreciate rapidly over time, and it doesn’t make sense for your product to lose value before the loan is paid off. Moreover, most brands periodically release new models, which makes the previous ones outdated, and eventually their prices drop.
5. High Credit Usage Ratio:
When you take advantage of credit card EMIs on your credit card, your credit utilization increases. It is recommended that you keep your credit utilization ratio below 40% of your eligible credit limit. For example, if the total qualifying loan amount is Rs 5,00,000, you should not take out a total loan of more than Rs 2,00,000, as this will increase your credit utilization ratio and affect your credit score .
6. Credit Score Damage:
If you are unable to pay your credit card dues on time, have a high credit utilization rate, and check your credit score many times in a short period of time, frequently applying for loans, credit cards and credit card EMIs can negatively affect your credit score .
7. Price increase:
As mentioned earlier, smartphone prices have skyrocketed due to the supply crunch and the increasing cost of components. If you want to buy your dream smartphone at the best possible price, this is not the time to buy a smartphone with EMI credit card facility by paying huge interest.
It is not recommended to buy a smartphone through the EMI of a credit card, because you will end up paying a very large amount during the term of the loan. While the monthly amount of EMIs makes them seem affordable, they actually cost a lot more than the actual price of the device. However, if you are ready to pay the extra amount and need to buy the smartphone during Diwali sale, make sure to check multiple online and offline sellers. Compare the deals they offer and choose the one that has the best value for money. Furthermore, remember to pay your credit card installments on time because failure to do so can result in huge late fees, and can negatively affect your credit score.
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