As gold prices spike, should you buy jewellery using your credit card? | Mint

With gold prices rising rapidly, there are investors who are contemplating investing into the precious metal with an intent to earn profits in the near future. While most investors use a debit card or UPI payments to buy gold, some also prefer to use credit cards for these payments as well.

However, is it advisable to use a credit card for buying jewellery? Well, it does not harm so long as you don’t accumulate too much interest in it. Since credit cards levy a high rate of interest (sometimes as high as 2 to 3 percent per month), this will be adjusted against the increase in gold prices.

So, either an increase in gold prices is higher than the interest payment for a credit card or you pay your credit card bill within 45 days of the interest free period.

Key advantages of buying jewellery with a credit card:

Rewards and cashback: If your credit card offers rewards on purchases, you can earn points or cashback, making the purchase more valuable in terms of money.

Sign-up bonus: When you buy jewellery, it can help you reach the minimum spending requirement for a credit card welcome bonus.

Buyer protection: Many premium credit cards offer purchase protection, extended warranties, and even theft protection on high-value purchases.

Zero percent interest offers: If your card has a 0 per cent APR promotional period, you can spread out payments without paying interest.

However, one should avoid using credit cards for buying jewellery in following scenarios.

Disadvantages of buying jewellery with a credit card

High interest rates: If you don’t pay the full balance on time, interest charges would soon remove any benefits that you stand to earn.

Potential surcharge: Some jewellers charge extra fees for credit card payments (often two per cent) to cover processing costs.

Credit utilisation impact: A large charge can raise your credit utilisation, thus affecting your credit score.

Meanwhile, you should avoid buying jewellery by using a credit card in some of the scenarios which are listed below:

Avoid buying jewellery in these circumstances

I. If the store charges extra fees for credit card payments.

II. If you can’t pay the balance in full before interest kicks in.

III. If the purchase significantly impacts your credit utilisation.

(Note: Using a credit card carries its own set of risks)