Many of them know what credit card is, thanks to all the calls that you receive even when the phone number is on a DND. Maybe credit card knows how to reach to you.
Credit Card has its own share of misconceptions about it, there are pros for the users with strict discipline and cons for ones who overlook terms and conditions and don’t read the numbers that they are spending.
Because many use the credit card, it is important to know how its use can save money. Saving money with a credit card is a possibility if earning from it is not. We will discuss the cases where we will see the common loopholes where the money is lost and probable chances where money can be saved or the money is made in legit ways.
There are many banks which can process a credit card for individuals. The limit on each credit card can vary from individual to individual. The limit on the credit card roughly depends on the income, credit score, existing loans and the other factors that state that the repayment of the loan amount will be done timely.
Types of Credit Cards: Basic Intro
There are also different types of credit cards that come with different features. These features help a spending habit of a particular type.
For people who are frequent flyers, there are credit cards that help them to save money on booking air tickets. They also save money due to a point based system which helps them redeem points for actual money on tickets. Like this, there are cards especially for Fuel, Groceries and Shopping and overall use. Banks can provide customized cards and features with credit cards.
A couple of reasons that drive people to get a credit card is that it has offers, which are too good to resist. Another important reason is that it gives you MONEY. (Money that needs to be paid back)
The reason that people lose money, is because they spend more than they can pay back in full in a given time. They get attracted by the shopping offers and purchase things that they not necessarily need.
But, this is completely their choice what and what not to buy. The bigger problem than that is the ability to not understand the terms and numbers that they are spending.
We will not talk about shopping habits or how to urge them, this is beyond the scope of this article.
We will talk about how you can leverage numbers and terms of cards for your benefit.
Billing Cycle of Credit Card:
This is the period from the day when the bill is generated and day within which you need to repay the amount.
The dates from cards could be different based on the issuer of the card. The cards in the statement do let you know the minimum amount you need to pay. But, paying only the minimum amount will attract interest on the unpaid amount.
You can take the benefit of this billing cycle to make the most of your shopping. Cards usually get around 50 days on no interest loan. The tenure for each card may be different. Best is to read the terms and conditions or call the customer care to understand the billing cycle.
It is best to pay the full amount before the given date. Because the interest rates on credit cards are relatively higher. It can go up to 36% (annually)in India with most of the card issuers. Safe is to know the amount you are spending.
For e.g.Principal Amount:
Making the most of Offers:
Credit Cards and their issuers come with strong network tie-ups that allow them to provide offers that can save a lot of money. If you bag a card from a bank which provides good offers, you can save a lot of money on the go.
Most of our purchases have turned online and it could be a good way to save some pennies there. The savings made on offers could be worth the annual charges of a credit card. Have a check at your lifestyle, and apply for a card that suits your requirements. There is almost a card which would help you save decent money.
Credit Cards depending on the issuer do have a system where your purchases lead to points. This points can be redeemed for vouchers for shopping or can actually be used as cash credit to the account of the credit card.
Figure out cards which give cash credit on redemption. Apart from that, there are cards who have decent voucher systems. You can use it for the next shopping spree.
Note: Make sure to have a watch if there any points that are expiring in a current month, or to have a proper check on the validity of the coupons and points that you have on the card.
There are cases when there is an overspend on the card. The card repayments are not done on time. This can affect the credit score negatively. It is better to quickly have a balance transfer to a lower EMI.
There is also a challenge with only paying the minimum amount because it will catapult into a huge interest amount over time. It is in the best interest that you can transfer the amount to a bank loan which will be at a lower interest rate.
Transfer balance can be a money saver. The personal loans have an interest rate from 12% to 22% depending upon the eligibility.
Know more about personal loans, the limit and the important factors for getting a loan easily, by click on the two links.
It is best to save even 10-14% over a year. If the loan amount is 100000 INR, you save up to 14000 on interest. In most cases, the actual amount saved is more than 14000.
Why and How do you Save more?
There are missing elements of Credit Card charges that are overlooked.
GST (or any time of taxes) –
The amount that you use on credit card is subjected to taxes due to secondary reasons. This taxes can have a huge effect on the overall spends on the card. You need to watch the statements for these additional costs.
The secondary reasons mean, the tax is not directly charged on the amount used. The tax is usually applicable on late payment fees, interest rates, and additional fees if any. Initially, this amount might look small, but once calculated over a year, could be a substantial amount.
Service Fees if any –
Credit cards do come with annual charges. Some of the cards have them waived off if you have used the card up to a particular amount. Each card has its own terms and conditions. It is good to read about them clearly and see if there are ways to set off these annual charges.
There could be additional services charges for converting your balance into equated monthly installments. Look out for the additional charges apart from the interest rates for different tenures.
Transaction Fees –
The credit card comes with a base currency for transaction. When you use the credit card for different currencies, for example, to buy a product in dollars there might be a transaction fee or a conversion fee levied to your account.
It is good to check the transaction fee that your card charges. Usually, this charge could be 3% of the amount. Have a look out on those fees.
Recently, there are many freelancers or digital marketers who need to buy themes, ad spaces or any other things in dollars. Make sure you have considered conversion charges while making invoices for the clients.
Over Utilisation Fees / Penalty –
Most cards charge credit card holders who over spend on the card. This can happen for two reasons
Case A: If you have a limit of 50000 INR and you have utilized a limit of 48000 INR. While purchasing a product of 2000 with additional taxes if the price goes over 2000 Rs, there are two chances, one is that the transaction gets declined or it is allowed to process and you are charged a penalty for overspending over the card limit.
Case B: If you have a limit of 50000 INR and you have utilized a limit of 48000 INR. On the billing date, if the interest and other charges levied are more than 2000 Rs, it auto deducted from the limit you have. If the limit crossed even with this process, you might end up paying more on the penalty.
The charges can be around 500 Rs. This can depend again from card to card and issuer to issuer.
You should keep a strong watch and use the card with care. Credit Card Frauds are also on the rise, even with extended protection technologies. The idea is to keep the basics right.
Do not Share your 16 Digit Number.
Keep safe the details like the expiry date of the card.
HIde your CVV
Credit Card Credentials should not be saved on third-party platforms.
Don’t Share any of the above details on the Phone.
Don’t Share OTP.
Also, you need to keep a note that most of the credit cards can be transacted without an OTP. Though Indian Payment Gateways mandatorily need an OTP. The ones outside India might not need it.
Make sure the notifications of the transaction are on. Keep them activated on email and mobile. In case one has tampered you have access to your transaction.
If you see a fraudulent use, immediately report the customer care, and also write an email on the official id as a proof of the call. Make sure you also take the complaint number.
The Pros: You don’t lose your liquid cash. Plus many card issuers give complete protection against fraudulent transactions. Still, it is always advisable to be safe than to find a solution after the damage.
Making Money with the Credit Card:
This is a high risk situation, and not suitable for all. Also the idea is not recommended, but a mathematical possibility.
If there is a high credit limit on the card and if you can do a short fixed deposit of the liquid cash you have, you could possibly earn points on the card and get some minimal interest on the deposits. Make sure the amount is paid back on time, otherwise external charges would result in loss.
Credit Cards can give leverage to spend money and earn points, which can be a bonus for an individual. But, if repayments are not done on time, credit cards can create a snowballing effect and lead you to substantial debt. It is important to be careful with the numbers. It is good to make a chart of the spends, there are apps that allow you to analyze your spending habits. In return, it will help you choose the right card. Happy Shopping and Saving Money.If you have any queries or questions feel free to comment in the section below.