How to become a smart Credit Card user and profit from it

09 DECEMBER, 2019

Your Credit Card can actually save you money!

The general perception is that a credit card is to be used for making payments and bills. But it actually makes sense to understand the hidden benefits of credit cards to effectively use it to our advantage.

Experts suggest that bills for electricity or insurance premiums, etc. should be made using credit cards. There is twin benefit in this: either you get cash back or you get reward points when you make these payments. And on the flip side, these large payments eat into your monthly credit limit, thus helping you indirectly to curb overspending.

A credit card offering cash back can be a good money-saving tool. For example, there are credit cards that offer 5% to 15% cash back on certain spends such as utility bill payments, etc.

Sometimes card issuers and companies, like retail chains or online shopping websites, tie up for cash back arrangements for a limited time period, like during an end-of-season sale.

However, there is always a limit on the maximum cash-back payable on each card. So never go overboard!

The most important thing is to pay your bills on time to avoid paying a high interest rate, else the whole purpose of spending cleverly on your card will be defeated.

Choosing a card

Do your homework — if utility bill payment is the biggest component of your total monthly spend, it is better to choose a card that offers a cash back on utility bill payment rather than a card that offers air miles or reward points on every spend.

If you go to your hometown by air once a year, consider going for a co-branded card that offers air miles, which can fetch you a free air ticket once you have accumulated enough air miles.

Reward points

While redeeming your reward points, you can do some smart planning. Reward points can fetch you a wide range of options — from a gift voucher to a car; from a hot air balloon ride to charity for the needy. So, plan with these little goals in mind.

Always pay on time

This is a no-brainer. No matter what, you must pay your dues on time. Make it a point to clear the full pending amount every time, so you can avoid paying any interest. If it is not possible, get your outstanding amount converted into EMI by paying nominal processing fees. This will go a long way in keeping your credit score healthy.

If you have been using credit cards for years and are not aware of the rules, it is time to go through the terms and conditions of the card once again. Ask your card issuer to send you a copy.

Do this and you would have already taken the first step towards becoming a smart credit card user.