Use it wisely

Disclaimer – Only and only if your are financially disciplined then have credit cards, else it can be a debt trap and money losing instrument. 

People believe that credit cards are bad for your finances. But to the contrary, it actually helps to earn money, save money and also to spend money wisely. There are so many benefits such as credit free period, building credit history or credit worthiness, discounts, cash backs, reward points, air-miles, etc.

Decoding the credit cards basics

  • If you have your salary account with banks such ICICI Bank, HDFC Bank, Axis Bank etc. you can get your first card easily for free. Get it in your first job itself to starting building the credit history.
  • Do not be wary of paying credit cards fees, sometimes the value from the card is much higher than the charges. Understand the fine print, before you apply one.
  • Get credit cards via appropriate channels such as online applications, referrals from friends and relatives, credit cards desks in banks, airports, etc. Do not take t from random sales executive on road to prevent your documents from misuse or identity theft.
  • Use the cards diligently as if you are using your debit card or cash. Don’t indulge in unnecessary expenses to get into negative cash flow situation.
  • Pay all the dues in full. Do not jump to make the minimum payment due and think its sorted. You will have pay hefty interest amount on outstanding, and that’s the start of debt trap.
  • Pay the bill at-least 3-4 days before the due date to avoid late fees and interest charges. Change the billing cycle to match the salary credit period. As soon as you receive a credit, pay all the credit card bills. This way you won’t forget the payment dates.
  • Do not set standing instructions for payment of credit cards and just forget about it. This could make you complacent and you might end up paying the extra charges and expenses which you might have not incurred.
  • Always read the statement, check the important details, each charge item, due date, rewards points, promotions, etc. to be on top of your finances. It will help you to identify the unnecessary or impulse expenses which you might not find out when paid in cash. This helps in budgeting too.
  • Have multiple credit cards of leading banks and institutions such as HDFC Bank, Citibank, SBI Bank, Axis Bank, American Express etc. to take advantage of the various promotions and cash backs.
  • Increase your credit limits or card upgrade as soon as you get that message/ email. This would help to decrease your credit utilization ratio and increase your credit score.
  • Once you use the card diligently for 6-9 months, ask for upgrade and limit enhancement by submitting income and tax returns proofs or credit card statement of another card to increase the chances of approval to maximize the value from the card.
  • Track the reward points monthly and redeem them well before expiry.
  • Explore all the possible redemption options and maximize the value. This comes more important while travel hacking by redemption of air-miles for a free business class ticket, first class or premium class upgrades, free hotel stays, etc.
  • Call the call center executives for limit enhancement, card upgradation, reward points reconciliation, etc.
  • Do not hesitate to ask or negotiate on reversal of fees or late charges, getting vouchers on renewal, interest rates on card, registration of promotion if not eligible.
  • Do not apply for multiple cards at the same time and be choosy on which card you want to take or keep. Map the features of the cards against your needs.
  • Every person has a different perspective, like I can manage with 15+ cards yet I don’t default. Manage multiple cards through spreadsheets to track important details such as spends, reward points, etc.
  • Do not close the first card or one with longest credit history as it impacts your credit score adversely.
  • Be on top of your credit score by checking it at least quarterly. Good score helps in getting home, personal loans, etc. at cheaper interest rates and you can save lacs of rupees on it. It increases your negotiation power.

Decoding the credit cards reward points

Points are alternate currency
  • Always ask for card upgrade and gradually move to the premium card category to maximize the accumulation of rewards points.
  • Put all the expenses on credit card, even petty ones on the premium card. Do not use your debit card or cash unless unavoidable. Earn reward points each time.
  • Put all the big ticket expenses on white goods such as new car, appliances and accessories to achieve the spend criteria faster or making the most of promotions and earn more rewards points.
  • Recharge your wallet with your credit card. Earn reward points there too.
  • Register for all promotions, offers, etc. Talk to call center executives, if you have any queries on promotions or eligibility. Sometimes you might assume certain things and lose out due to misinformation or confusion.
  • Transfer the reward points or air miles to the airline or hotel partners during promotions to get value multiplier.
  • Use CRED to pay the bills, and earn points there too. Don’t worry its safe. Register using the link if you haven’t.

Decoding other credit card benefits

  • Use cards that offer cash backs, discounts, zero interest EMI schemes to reduce your spend.
  • Avail domestic lounge benefits and enjoy the buffet meals and desserts on the airports.
  • Take priority passes for accessing international airport lounges, hotel memberships, and even golf lessons (if interested) to maximize the value.
  • Avail benefit of meet and greet facilities to meet your favorite celebrity when these card companies organizes such events.
  • Make use of the concierge services to book hotels, reservations, planning for travel, etc.

Hope you could get some insights and unspoken rules of credit cards. Let me know the feedback in the comments section.