A credit card is an awesome tool that should find a place in your wallet. It ensures that you do not have to carry a lot of cash, you can make purchases without having the cash in hand or in the bank at that point in time, and you also end up earning rewards and loyalty points from the credit card issuing bank for using the credit card and being consistent with paying the credit card bill on time.
The 3 tips as below are smart (and perfectly legitimate) ways to use the credit card and ensure that it works to your advantage:
1. Know the last date of payment and pay the full amount due: As a credit card holder, you must know the last date before which you should pay your credit card bill. By linking your bank account from the issuing bank to the said credit card, you can pay the credit card bill using the net banking channel of the bank within a few clicks. It is highly recommended that you pay the full amount that is due. The credit card gives you the option of paying in parts but the interest rate charged on the debt on credit cards is very high. If you are a smart credit card user and pay out the entire bill for the month before the last date of payment, you won’t have to pay even a single rupee as interest.
Image credits : thebalance.com
2. Leverage it as an interest free loan option: If you know the billing cycle of the card well, you will know when to make your purchases so that you can get the maximum benefit. For e.g.: If your credit card’s billing cycle is 18th of the month to 17th of the next month, you should delay your purchases, unless extremely important, and make it after the 19th of the month. The bill for this purchase would get generated only on 18th of the next month and the last date of payment works to about 20 days later. In effect, you get an interest free loan of up to 50 days. What’s more, you also get interest on the money parked in your savings bank account for these 50 days – something you wouldn’t have got by paying in cash at the same instant when you make the purchase.
3. Know the charges, waivers and reward and loyalty points: When you order a credit card for yourself, there are cards which give you a waiver based on the first few days of usage. For eg: There are a few credit cards in India which would wave off a joining fee if you make purchases of over a specified amount (say Rs. 5000) in the first 45 days, then the joining fee of Rs. 500 is waived off. If you use such cards extensively to make all necessary purchases, you can save money on joining fees and such charges.
Furthermore, the use of credit cards entitles you to loyalty or reward points which can be used later for another purchase.
And with the boom in mobile wallets in India, you can use the credit card to top-up a wallet, get the discount by paying through the mobile based wallet, and pay the credit card for the top-up much later (mostly after 40-50 days). Thus, you end up getting the best of both world – an interest free loan using your credit card, and incentives and rewards by using the wallet as well as the credit card.
That’s smart, isn’t it? And now that you know these tips, we bet you will be smart about using your credit cards.