Keeping multiple credit cards can be a great saving instrument, if used wisely and timely
Young people thrive on credit cards. He has as many as seven credit cards of different banks and uses all of them very extensively. Apart from doing regular shopping, many pay for their electricity bill and all other sundry expenses using their cards. For all the cards they uses, he has not paid any interest on the credit availed of, thereby not allowing himself/herself to be harassed by banks for payment. And that’s why banks hate customers like them. Actually, credit card companies hate two types of customers — those who pay before due date of payments and those who don’t pay at all.
So how do they actually manage free credit every month to finance his purchases. There is surely no magic working for him. It’s just that he knows the art of managing multiple credit cards efficiently. What he does is simple. He meticulously makes a purchase a day after his statement is generated. For example, if his statement is generated on 20th of every month and the payment due date is on 11th of the next month, he will make sure that his next purchase is made on 21st. By doing this, he not only gets his next statement after a month, but also avails an additional 21 days to clear his dues. In all, it allows him to carry forward credit purchases for around 52 days.
And that’s not all. By having multiple credit cards, he is also able to transfer the balance due on other cards. In simple terms, the amount due on one credit card can be transferred onto your other card. But for this, you will have to pay a minimum amount due (5% mostly plus processing free) to the bank offering you balance transfer. This may not be a hefty price to pay, especially when you are short of cash and have to make heavy or expensive purchases such as jewellery or electronic goods on special occasions like weddings and others. Well, that’s not too heavy a price to pay to avail of a further interest-free period of three months!
So in all, if you do balance transfer, you can have interest-free credit for almost five months! In simple terms, due to different billing cycles, your purchases on cards can be planned better if you have multiple cards. Card-holders, however, should not get into the mode of paying 5% minimum amount due without realising that they are actually paying around 40-45% interest p.a. on rotation.
Although it is known that you must clear your dues by the payment due date to avail of interest-free credit, there could be times when you may fall into a debt trap. Do remember that in case you do not clear the amount due by the due date, you are charged interest on a daily basis for every day since your purchase. This whopping charge would reflect in the next statement and you would actually end up with no credit-free period — not even a single day. The annual interest rate is over 30% in most cards. Additionally, non-payment of minimum amount due (MAD ) by stipulated date also results in heavy penalties and charges being levied. And if you are the one who has a pay-cheque-to-pay-cheque existence, then you might as well have to pay for cheque bounce charges and late payment fee, which could further leave you poorer by several thousand bucks. As a way out for the people caught in the debt trap. Convert your credit card dues into a bank loan. By doing this you can repay your dues at 14 or 15% instead of paying 35-40% to credit card companies. He also observes that Indians are not used to using credit cards and they should not treat it as 'free money'. According to an official from Citibank dealing with credit cards who did not wish to be named, You could be headed for trouble if you have no idea about what your total debt adds up to, adding that consumers should not hesitate to call their creditors asking the due amount. This way they can have some control over their borrowing.
In fact, having multiple credit cards is a good idea only if you are ready to devote half-an-hour every week to keep a track of all your purchases. Other major advantage of having multiple credit cards is that if any of your card is not working, others may come in handy to save you the embarrassment and inconvenience.
Another good benefit of having multiple credit cards is that if you have to buy high value goods and the limit is almost full in one card, then the amount can be split in two cards. The other advantages on purchases made on credit cards such as cash-back on shopping and petrol purchases, all translate into savings.
In a nutshell, multiple credit cards can be a great saving instrument when used wisely. Otherwise they can land you in a soup.
