Skip to main content

Personal Finance: Making your credit card pay for you

Everybody cautions users about plastic money and debt traps, but if used intelligently, you could reap many benefits



When they picked London as the destination for their summer holiday this year, Nina and Rajiv Malhotra had a plan in mind. They wanted to fly business class, stay in luxury hotels and have a blast in London, but they also were sure about keeping the trip a low budget affair.



“It was a grand plan, but with meticulous planning it all fell into place,” says Rajiv, “most vacation plans start with saving months in advance, but ours started with spending. This might sound crazy but really what worked for us was transferring all our everyday expenses to our credit cards. This gave us enough reward points to convert them into Asia miles and get free tickets to London!”



All expenses paid:

Almost eight months in advance, they started using their credit card for everything, right from groceries, electricity bills, phone bills, insurance premiums, petrol bills and even donation to charities. Rajiv, who owns a furniture business, also used his card to pay his business expenses like procurement of material and company rent. In addition they planned their outings and eat outs after looking at the partner schemes their card company offered.



“We used to eat at only those hotels that had a tie up with our bank. This way our reward points got doubled. Similarly, for all our domestic travel we stuck to the online booking sites that our bank had a tie up with, this bumped up our points in a big way,” says Rajiv.



The most important part of the plan, however, was to instantly write a cheque to the bank for all the money spent, thus avoiding the debt trap. “This way, we were spending exactly what we would have spent in our daily lives, except that by making sure we used only plastic to pay, we piled up enough reward points to get free tickets,” says Rajiv.



The Malhotras’ case is an interesting example which only goes to prove that contrary to popular belief that ‘plastic is a source of all evil for the household economy’, if used wisely and with diligence, a credit card can in fact fetch you handsome rewards.



Look for tie-ups:

Subtleties are important, however. For instance, if you have an airline’s frequent flier privilege card, then go with a credit card that has a tie up with that airline. This way, each purchase will work toward your free ticket. Santosh Sawant, a software professional in Mumbai, uses his personal card for all his official travel, and then claims reimbursement from the company. “This way, it’s double gain for me. I stock up my reward points for the money I don’t even have to pay.”



Looking out for partners is indeed an intelligent way to double up your reward points. In fact, you can even combine your credit card reward points with loyalty points that the merchant establishments offer and quadruple your money like Radhika Raina from Mumbai did.



Shopper’s Stop has a tie-up with Citibank that offers bonus reward points if you pay for your shopping using Citi card. In addition, Shopper’s Stop also runs a separate loyalty card offer of their own. What Raina did was simply: she redeemed her reward points to get Shoppers Stop vouchers, which she combined with her loyalty points, thus quadrupling her money.



Cash prize:

If you don’t want to get into the hassle of having to claim the reward points, there are cards that offer you cash instead. Several banks offer cash back schemes that could get you up to 5% cash back on every purchase.



Divya Kapoor, a Mumbai resident, manages to pay off her credit card bills every few months simply by using the cash back offer on her card. “I find it very convenient to be able to adjust my bills against my cash back,” she says.



Time the billing cycle:

But financial planner Kartik Jhaveri, director of Transent Consulting India, has a better idea to get an extra bonus to rewards from your cards. “In addition to reward points, your card can make you good amount of money if you manage your billing cycles right,” he says. All cards come with a free credit period that usually ranges from 30 to 55 days, depending on the type of credit card and the issuing bank. In effect, this free credit period means that you can actually utilise other people’s money free of cost.



“This works best when you do large purchases and time them really well,” says Jhaveri. So, for instance, if you are buying an expensive LCD, make sure that you buy it right at the beginning of a new billing cycle. This way you can use that much money for almost 55 days, invest it in some liquid funds and make a decent profit.



Transferring your balance to another card, if you own one, just before the billing date to avail of a higher free credit period or lower interest rate on the second card, is a good idea too. Because this way you can earn good reward points as well as save on high interest charges.



Some caveats:

But all is not hunky-dory in the world of reward points, there are plenty of loopholes too says Suresh Sadagopan, chief planner, Ladder 7 Financial. For example, when using the bill pay facility, one should also look for any hidden charges, as banks have different rules governing their credit card services. Pay attention to the fine print when you sign up for perks such as addon insurance policies, says Sadagopan. “There are some funny clauses there. For instance, for many banks, to claim a travel accident insurance, you’d have to prove that you bought the tickets using that particular credit card.” Also, some people get lured by the reward points and spend money recklessly. “So you might make a few points, but remember, you still have to pay the bank what you spent in the first place,” he adds.



Of course, if you are not an organized person, simply avoid using plastic. Because if you don’t pay the dues within the free credit period, you will be charged interest as high as 2.95% per month for the outstanding amount. This adds up to a whopping 35.4% per annum, which doesn’t even hold a candle to the money you make using the reward points or investment planning!

Popular posts from this blog

ICICI Pru Mutual Fund Dividend

ICICI Prudential Mutual Fund has announced dividend under the following schemes: Scheme Dividend ( Rs /unit) ICICI Pru Capital Protection Oriented Ser V Plan B-D 0.03611325 ICICI Pru Capital Protection Oriented Ser V Plan B Direct-D 0.03611325 ICICI Pru Balanced Advantage Direct-DM 0.06 The record date has been fixed as February 08, 2017. ------------------------------ ------ Invest Rs 1,50,000 and Save Tax upto Rs 46,350 under Section 80C. Get Great Returns by Investing in Best Performing ELSS Funds Top 4 Tax Saver Mutual Funds for 2017 - 2018 Best 4 ELSS Mutual Funds to invest in India for 2017 1. DSP BlackRock Tax Saver Fund 2. Invesco India Tax Plan 3. Tata India Tax Savings Fund 4. BNP Paribas Long Term Equity Fund Invest in Best Performing 2017 Tax Saver Mutual Funds Online Invest Best Tax Saver Mutual Funds Online Download Top Tax Saver Mutual Funds  Application Forms For further information contact  SaveTaxGetRich on 94 8300 8300 ------------------------------ ------ Leave y...

Hidden Bank Fees

  What Banks Hide From Customers Imagine after a peaceful and exciting holiday you receive your bank statement with steep charges. You then rush to your bank and start confronting staff members and to your dismay, you come to know that the high end debit card was charged very heavily. Wouldn't this cause damage to your finances? So remember, the world outside is full of deceptive and double cheating people. Unethical practices are always used by company sales person in order to meet the target. Credit card companies, mutual funds and bank institutions always play dirty tricks to lure customers and the practices are rampant. So here's how you should be careful while dealing with your banks: High End Debit Card Charges While opening an account with a bank you opt for a debit card with minimal charges. But later on when you upgrade your card and opt for high end debit card the annual charge rise by a good amount. Though such a card has slew of features but it all comes at a high ...

Partial withdrawal from PPF

  Public Provident Fund (PPF) account has a lock in period   If you opened a PPF account to meet your retirement needs,, think twice about withdrawing from this fund before retirement. But provided it's an emergency here are the rules. Public Provident Fund (PPF) account has a lock in period before which you cannot withdraw your money.   The partial withdrawal is allowed after the completion of 6 financial years . This means that you will be allowed a partial withdrawal from 1 April 2017. The maximum partial withdrawal allowed is the least of the following: 50 percent of the account balance at the end of fourth financial year, 31 March 15 50 percent of the account balance of the end of previous financial year, 31 March 17.   There's a loan option available on your PPF account between the fourth and the sixth financial year. You can obtain a loan of up to 25 per cent of the balance in your account. However, this will attract interest of 2 percent more than the prevailing ...

Updating a minor PAN card upon becoming adults

  Updating a minor's PAN card once they become adults A PAN card issued in the name of a minor does not contain the minor's photograph or signature, and therefore, cannot be used as a valid proof of identity. Once a minor PAN card holder turns 18, the relevant changes must be made in the PAN records. A new card is then issued bearing a photograph and signature. Application The applicant is required to fill up the "Request for new PAN card andor changes or correction in PAN data" form. The form can be filled up online by accessing NSDL's Tax Information Network website and clicking on the online PAN application tab. Information The applicant must mention the existing PAN number in the application and check the `photo mismatch' and `signature mismatch' boxes, and submit the online form. The form must also be printed out, signed by the applicant, and submitted along with two photographs. Documents Identity and address proof in the form of a copy of the app...

ICICI Prudential Value Fund Series I

Invest In Tax Saving Mutual Funds Online Download Tax Saving Mutual Fund Application Forms Buy Gold Mutual Funds Call 0 94 8300 8300 (India)   Performance of the scheme will be benchmarked to the S&P BSE 500 index ICICI Prudential Value Fund is a closeended equity scheme. The scheme will have tenure of three years (1095 days) from the date of allotment of units. Units of the scheme will be fully redeemed at the end of the maturity period, unless rolled over. NFO PERIOD:   The NFO is open from October 18 to 28. The minimum subscription during the NFO period is Rs 5,000. SCHEME OBJECTIVE:   The scheme aims to provide long-term capital growth by investing in a well-diversified portfolio of equity and equity-related securities. INVESTMENT STRATEGY:     The fund proposes to invest in stocks that are trading at a huge discount in the BSE 500 index and plans to book profit and distribute dividen...
Related Posts Plugin for WordPress, Blogger...
Invest in Tax Saving Mutual Funds Download Any Applications
Transact Mutual Funds Online Invest Online
Buy Gold Mutual Funds Invest Now