Tuesday, 17 November 2015

Using Your Credit Card To Save Money

Credit Cards have become an integral part in today’s financial world. They offer a lot of convenience to customer but overdependence on them can often result in falling in debt trap or a poor credit score.
It is very important that one uses these small plastic things careful and after due deliberation. Below we will try and look at some simple ideas which can help in saving money through the use of credit card.
Though it may sound contradictory but using credit card to save money is not so difficult; just read on to find out.
Timely payments are the key to financial discipline:
Whether it is credit card payments or EMIs, paying on time not only helps you save money directly but also improves your credit report which can in turn have financial benefits. Late payment attracts high penalty from credit card companies like late payment and financial charges. Though credit card companies offer the option of making a minimum payment; this option should be used only in extreme conditions and then also try and pay a little more than the minimum due amount.
Don’t make late payment or paying minimum amount a habit as it may increase your risk perception in the eyes of the lender. Sometimes due to a genuine oversight or some banking error one may not be able to pay his/her bills on time. In case one has a good credit record then the credit card company may agree to overlook this or may reverse the charges on request. For a regular defaulter this will definitely not be done.
It’s a good Idea to pay utility bills by using credit card:
Utility payments like water, electricity, insurance, telephone bill etc are mandatory payments to be made every month or annually. Paying them by using a credit card has two fold benefits. Most credit cards have reward point system or offer a cash back facility. Thus by paying these bills you may actually get a benefit either in the form of a cash back or reward points which can be redeemed later for some item of your choice. Using this credit card lets you earn some interest on your savings lying in the bank also.
Understand Your Credit Card:
Before applying or in case you already have one understand your credit card well. Credit card companies may offer a lot of “lucrative deals” but one should always be clear about the fine print. The credit card companies are also running a business and are not there for some charity. As a rule cash withdrawal from credit card must be avoided; even personal loans are cheaper than that.
Be clear about the joining fees, annual charges, late payment charges etc. In case you have two credit cards check features of both. If one offers reward points for payment of some specific type them you can use that card to make payments for that utility or in some cases petrol etc (especially in case of co-branded cards). Sometimes some shopping outlets or restaurants also offer discounts for specific cards; be sure to be aware of this. A list is usually given as a part of welcome kit; we rarely read it though!!
Converting a Big Purchase to EMI:
This facility needs to be used with caution but can sometimes prove to be very useful. Credit card companies offer to convert big ticket purchases to EMI. In case one plans to go for a personal loan this option may be a cheaper one with no paperwork involved. However missing a payment can or erode away the interest rate advantage so be careful. Often a zero interest EMI may be also available but be sure before you opt for this facility.
Rewards Points!!!
We all love freebies and gifts. That’s why I saved this for the last. Credit card companies have a full catalogue of the rewards that offer in return of accumulated points. This may range from gift vouchers, to toiletries, to some luxury items.
Spending does actually get you returns. Be sure to look at the catalogue and choose wisely. Sometimes points may not be carried forward to the next financial year and may lapse so act timely. In case you don’t like anything there are some gift vouchers that one can opt for.

Use your credit card wisely and earn while you spend!!

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