Shopping online is no longer a novelty. Rather, it has become a necessity and part and parcel of our daily lives. From shopping for products that are not available in our neighbourhood stores to paying EMIs, utility bills, ordering takeaways, rarely a day goes by without making an online transaction.
Today’s tech-savvy consumers spend hours researching the best products to buy online and scouting for the best deals. However, not many spare a thought on the payment mode. In India, the majority of online shoppers opt for COD (Cash on Delivery), a debit card, digital wallet or an internet banking account to pay for their purchases. Only a small minority of customers use their credit cards to pay for online shopping.
There’s the myth that using a credit card leads to extra charges and unnecessary debts. This cannot be farther from the truth. In today’s post, we put an end to this myth. We share with you the reasons why you need to use your credit card to pay for your online purchases.
Why is a credit card the better choice for online shopping?
Here are the top 6 reasons why using a credit card for online shopping is the smarter move:
Enjoy Rewards, Loyalty Points & Cashback Offers
One of the biggest perks of owning a credit card is that it opens a world of exciting offers and deals. Most credit cards are part of a loyalty program. Whenever you make a minimum spend (generally Rs. 100), you earn rewards points that are added to your account. You can then later redeem the accumulated reward points for gifts, air miles, or even pay for other purchases.
The number of reward points earned depends on the type of credit card you own and the purchase category. For example, the HDFC Diners Club Black credit card offers 5 reward points for every Rs. 150 spent on it. Whereas the HDFC Platinum Times credit card offers 3 reward points for every Rs. 150 spent on it.
On top of the loyalty points earned, shopping online using your credit cards offer other perks as well. For instance, Zomato, Swiggy, BookMyShow, and other online marketplaces offer extra discounts when you complete the purchase using a credit card. This helps to increase your savings while shopping online.
Besides the instant discounts and reward points, credit cards also offer cashback for online purchases. The idea behind cashback is simple – use the card to pay for your online purchase and a specific percentage of the transaction is rebated in your bank account (credit card account) in the form of cashback. This offers you additional savings on top of the other perks listed above.
Additonal Reading :
Build your Credit Score and History
This is one of the most underrated benefits of using a credit card. Having a good credit score is beneficial in several ways. It not only improves your eligibility for securing loans but also helps you enjoy better interest rates and loan offers.
Using a credit card responsibly is one of the easiest ways to build your credit score. A credit card is like a short-term loan and by repaying the monthly bill on time, you build a good credit history. This impacts your credit score positively, helping you boost the numbers on your credit rating.
Additional Reading: How to pay your Credit card bill online
Pay for Big-Ticket Purchases with Easy EMIs
A credit card makes it easy to pay for large online purchases in small easy EMIs. Let’s say, you want to purchase the latest flagship mobile phone, but you don’t have sufficient funds to pay for it in one go. You can use your credit card to complete the purchase online and pay for it as EMIs.
All major online retailers like Amazon, Flipkart and others offer no-cost EMI options for credit cards. No-cost EMI means you don’t have to pay any interest on the purchase. Make sure to choose the credit card EMI option while checking out to avail of this facility. Choose your preferred EMI and select the tenure. The EMI amount will be deducted from your credit card account for the remaining tenure.
Keep your Online Shopping Safe & Secure
There is a common misconception that credit cards are not as secure as debit cards. The reality is that credit cards are incredibly secure, especially the latest-gen cards that come with an inbuilt chip.
Even if someone manages to steal your card number, he will not be able to misuse it, as the majority of credit cards today require two-step authentication. This means besides entering the card number, CVV number (the three-digit code on the back of your card), you also have to enter the OTP received on your registered mobile number to authenticate the purchase. Thus, credit cards offer an additional layer of security and are highly safe for online purchases.
Protect yourself from Defective Products and Fraudulent Transactions
Have you had a bitter experience shopping online? You buy a product with great expectations, only to be disappointed that the product that you received is defective or fake.
When you pay with a debit card or mobile wallet, you do not have any leverage over the seller as the amount is instantly debited from your account. On the other hand, when you pay with a credit card, you have the option to exercise the payment reversal feature. You can ask your card issuer to reverse the payment, citing the defective product.
Not just defective products, credit cards also protect you from fraudulent transactions. If you suspect fraudulent activity on your credit card, you can raise the issue with the credit card company. The card issuer investigates the transaction and reverses the charges if it’s a fraudulent activity. This dispute resolution is also available with debit cards, but it generally takes a longer time to resolve.
One of the biggest perks of shopping online is that you can purchase anywhere in the world. Today, the majority of eCommerce retailers offer international shipping. But, the one catch here is that not all international sellers accept debit cards or internet banking. With a credit card, you can shop on any website in the world and get your favourite products delivered right to your doorstep.
When should you NOT shop with your credit card online?
While using a credit card for online shopping offers several benefits, there are certain scenarios when you should not use one. They are:
- You have a hard time paying your credit card bills on time and in full
If this happens often, then it’s best to stick to debit cards, internet banking or COD. This way, you spend only the money you have on your account, thereby avoiding falling into a credit card debt trap. Not repaying the credit card bill on time and in full incurs high interest charges and late penalties.
- You have a habit of overspending
If this sounds like you, then it’s best to pay with debit cards. This way, you can limit spending to the money you have in your account.
- You tend to spend the entire credit limit available on your card
Maximising the credit limit on your card is not good for your credit score in the long run. If you have a credit card with a low credit limit, you can request your bank/card issuer to increase the limit. If that’s not possible, then it’s better to avoid maxing out your card limit regularly.
Additional Reading: How to apply for a Credit Card
Credit cards are incredibly advantageous for individuals who are financially disciplined. If you do not spend the entire limit on your card and pay the monthly bill (in full) before the due date, then a credit card does wonders for your portfolio. Using a credit card responsibly for online shopping offers you a range of rewards, loyalty points, cashback and other offers, helping you maximise your savings.
If you know how to use a credit card responsibly, then it’s highly recommended that you use it for all your online transactions and limit your debit card only for ATM withdrawals.
FAQs - Why is a credit card the better choice for online shopping
1. What is the ideal credit utilization ratio?
The ideal credit utilization ratio generally accepted by most lenders is a maximum of 50% of the total credit limit.
2. Why is it dangerous to spend the entire credit limit on your card?
Spending the entire credit limit on the card shows the lenders that the cardholder is heavily dependent on the monthly credit to carry out even their financial transactions and does not have enough liquid cash. Such a cardholder is reviewed as a high-risk person for a future line of credit.
3. Is using credit cards for online shopping safe?
Yes. E-commerce websites have a secure payment gateway and the cardholder is asked for an OTP to authorize every financial transaction. Hence, it is quite safe. However, the cardholders also have to ensure that the online shopping website is not fake and has a secure URL.
4. Why is it better to use a credit card for online shopping?
Credit cards allow the cardholder to buy the necessary things without the need for immediate cash outflow. Hence, they are a better option for online shopping.
5. Can credit cards be used for international e-commerce websites?
Yes. Some credit cards have international acceptance depending on the bank and the profile of the cardholder. This makes it easier to use credit cards for international e-commerce websites.