How to Create a Savings Plan Using Your Credit Card

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31 MAY, 2022

The idea of saving money using a credit card might seem foreign to most people accustomed to using their credit cards for shopping sprees. However, contrary to popular opinion, it can be an excellent tool for savings as well. Depending on how you use a credit card, you can save a significant amount of money. Credit cards offer the flexibility to purchase goods and services you usually wouldn’t. It provides a direct line of credit without any loan application hassles. In addition, there are plenty of benefits in the form of reward points and cash back that can be used to cut down your cost of purchase. Read on to learn more about saving money using a credit card.

Tips to save money using credit cards

Most experienced credit cards with a good repayment track record know how to use it to their advantage. Here’s how to use credit card to create a savings plan.

1. Choose the right credit card

If you want to create a savings plan using a credit card, the first step is to choose the right one. It is one of the most challenging tasks that require factoring in minute details. Choosing the right credit card requires learning about your spending habits and purchase history. Creating a budget for your future expenses can help you learn about your needs and wants in life. Tracking the past shopping history is also an excellent way to know where you’ll spend the money. Using financial tools to track spending patterns can save you time and also offers better insights.

Once you know your spending behaviour and where you’ll be using the credit card, the next step is to find credit cards that offer rewards for those purchases. For example, if you are a frequent traveller who stays in hotels often, opt for a travel credit card to save money on travelling expeditions. You can get discounts on hotel bookings, flight tickets, restaurants, etc. This will ultimately result in lower spending and savings. Alternatively, if you are a brand conscious buyer, look for credit cards that offer reward points for brands you buy from.

2. Use credit cards for purchases regularly

Using a credit card for purchasing goods and services frequently will increase your reward points and help you earn more discount offers. Although a higher credit utilisation is considered flawed, knowing your limits and planning regular purchases using credit cards can help save a great deal of money. Today, most online shopping websites offer some discounts or cashback when you pay using a credit card. So always be on the lookout for these offers and use a credit card to purchase whenever you find one.

Besides this, increasing your credit card spending will also help you avail of additional cashback every month. Most credit cards offer loyalty cashback to customers for using over a benchmark credit limit. You can also earn back the annual credit card fee charged by the issuer after spending over the threshold amount set each year. In addition, most credit card companies provide a fee waiver for frequent purchases made using a credit card. However, you must be mindful of the credit utilisation ratio and aim to keep it below 40% every month.

3. Keep an eye on the limited period deals

Limited period shopping deals and discount offers can be used to save money on credit card purchases. Credit card companies have tie-ups with different brands and shopping platforms. Most of the time, you will find limited period deals on some of the other items. For example, a cash voucher for spending over a given threshold in a particular month. It is essential to time your expenses well to save money with these limited period deals. You can turn on the promotional notifications from different brands and your credit card company to make a timely purchase.

4. Be punctual with paying the whole amount

Many people are used to paying the minimum due amount on their credit cards each month. This practice should be avoided if you are looking to save money using your credit cards. You should always try to pay the total amount by the due date. This will help you save money on interest expenses and other penalties on late payments. Being punctual with your credit card bill payment is crucial to earning rewards and loyalty points. Keeping your spending below your repayment capacity is essential to meeting your first credit card obligations timely. Money not spent is equal to money saved; therefore, it is vital to avoid any such late penalties.

5. Take advantage of price adjustments

Have you ever shopped for a good online and then found it at a cheaper rate after a few days? Well, it can be really frustrating and disappointing to lose money that could be saved. You will be surprised to learn that many credit card companies offer their customers a price adjustment advantage. These credit cards offer price protection benefits that you can use to earn the price difference as a refund to your account. You should check the policies of your credit card company to find out if they offer a price adjustment feature.

6. Leverage the power of 0% purchase APR

There are some credit card companies that offer a 0% introductory APR on new purchases as well. This is different from a 0% APR on balance transfer. When you get a 0% APR for a new purchase as an introductory offer, make the most of it. Not paying any interest on these purchases can help you save a reasonable sum of money. Plan your spending and use leverage this feature while purchasing high ticket items.

Final words

Learning about your spending behaviour and purchase history is an excellent way to find the best suitable credit card for your needs. The credit cards you choose should reward you for purchases you make. These are some practical tips that you can leverage to save money using a credit card.

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