HOW TO USE CREDIT CARD EFFECTIVELY!

We always wonder weather possessing a credit card is an added advantage or a potential threat that we carry in our wallets.

But the fact is u can make the credit card work for you than against you, if utilized smartly.

Let’s assume your credit card has a billing cycle for every 30 days, which would fall on 1st of every month and the credit card company gives you 50 days to pay back the money.

1. Try to pay all your utility bills such as Landline bill, Mobile phones bills and electricity bills, restaurant bills using your credit card.
2. Pay all your insurance premium thro’ your credit card
3. Buy all your grocery requirements on 1st of the month depending on your billing cycle.
4. If any home appliances, jewelry are to be purchased then try to use your card for the same.
5. Try to avoid transacting thro’ cash or debit card & instead use your card wherever it is feasible.
6. These all transactions increase your liquidity position.
7. You must pre calculate or estimate the amount you would be paying by using your card for all the above transactions.
8. Deposit this amount in fixed deposit for 49 days period on 1st of the month. The average interest would be 3.5% for this period (49 days). This extra money is your earned money & pay the due using the invested amount.
9. Points earned on all these transactions are to be consolidated at the end of the year & redeem them for the gift vouchers that can be used to buy clothes, apparel at discounted prices etc...
10. And NEVER withdraw cash using credit card.
11. Finally have a tab on all your transactions & make sure you have enough cash to pay them on due date and never default on your payment.

Illustration of the FD deposit:

If your bill is dated 1st January 2010, then you would have to pay the money by 20 February 2010

Let’s assume your estimated expenditure that would be on your credit card, is Rs 10,000.

If this amount is invested in FD for 49 days, on 1st of the month then the interest earned would be Rs 47 which would mature along with the principal amount Rs 10,000 on 19th February 2010. Pay the credit card due using the invested amount next day.

Assume if you would have transacted Rs 2 Lac on your credit card annually, the interest earned would be Rs 940, along with redeemed gift vouchers. This is extra revenue from your expenses isn’t it……….

Be sensible, swipe smartly!!!