Advantages and Disadvantages of Shopping Credit Cards

Sachin Vasudev, Associate Director and Head of Credit CardPaisabazaar.com said that shopping credit cards differ from regular credit cards in terms of additional privileges. On some cards, this could be instant rewards in specific purchase categories, while on others, it could be in the form of co-branded benefits. For example, using the Flipkart Axis Bank credit card would be a good option when buying an item from Myntra (Myntra near Flipkart) as you would get 5% unlimited cash back. However, let’s say you don’t want your online shopping benefits to be limited to a particular brand or website. In that case, you can go for shopping credit cards that are better for general online savings, like HSBC cashback credit card or HDFC Millennia, Vasudev added.

However, it is pertinent to note that if you carry a balance on your shopping credit card, the bank will charge the same interest as a regular credit card. Raj Khosla, Founder and MD, MyMoneyMantra.com said, “The charges for credit card purchases are the same as for regular credit cards, completely dependent on the type of card and the issuing institution. Typical charges for Shopping credit cards include a lump-sum joining fee, annual maintenance fee (almost every bank offers a spend-based discount on annual fees), late payment fees, annual percentage rate or APR for overdue payments, and higher limits. is included. fee.”

Here are some of the advantages of using a shopping credit card.

These are in addition to the benefits that are applicable to credit cards such as interest free period. An interest-free period is the amount of time you are given to settle your credit card bill every month and it allows you to buy goods and services without paying interest for a short period of time.

Instant Rewards: Many shopping credit cards offer instant reward points on purchases. These points can bring significant savings for users if used judiciously. Issuers also tie up with large online and offline retail brands, which translates into higher or additional discounts. However, you should choose the card as per your shopping preferences to maximize the benefits.

Financing of large purchases: Shopping cards make it easy for you to buy something now and pay for it at a time through easy EMIs. “While all cards offer this feature, shopping credit cards are usually optimized to make it easier and more rewarding. For example, when you are able to convert your purchases on your shopping cards into no-cost EMIs across most platforms enabled, it may not be true for all credit cards,” said Adil Shetty, CEO, BankBazaar.com.

Co-branded Benefits: There are many co-branded shopping credit cards with a large number of online and offline retailers.

These help you reach the merchant ‘sale event’ earlier than regular customers and benefit from attractive cashback programs. That way, with a co-branded shopping credit card, you can get the most out of your spending with partner brands.

However, you may not get all the benefits on a single shopping credit card, so you should choose the card according to your needs and spending preference.

Here are some of the disadvantages of using a shopping credit card.

Rewards come with limitations: Not all reward points accrue forever. “Many of them may be valid only for 1-2 years and expire after that. So, you should be careful with it and use them within the time limit,” Shetty said.

You get fewer rewards on other categories: You earn fewer reward points when you don’t spend on purchases and use a shopping credit card to buy other products.

Khosla said, “The rewards on other categories of expenses like fuel, travel, health are relatively less as compared to regular credit cards. In case of co-branded credit cards, the benefits in the form of cashback and bonus rewards are available from other channels and competing retailers. But not available.”

Know the hidden T&Cs: There may be many hidden terms and conditions related to minimum transaction value, maximum cashback/reward points etc.

“For example, some cards offer cashback only on online spending above a certain spending limit, so you won’t get any benefits for small online spends,” Vasudev said.

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Shopping credit cards cater to a full spectrum of customers with varying spending patterns and diverse preferences. Even within the shopping credit card grouping, there is another difference between online and offline shopping. Accordingly, you should use a card that suits your spending habits, whether online or offline. However, do not take this type of card if you are unable to control your spending and pay monthly bills on time.

So, if you spend a lot on purchases, you can consider getting a customized shopping credit card as they offer better reward points on purchases than regular credit cards. Additionally, shopping credit card partners offer more discounts over and above the existing discounts at merchant outlets.