Now that we all are under lockdown with more time on our hands let me tell you some secret tips. I am not going to get into what is a credit card, good bad or ugly, we all know that bit. Today lets figure out how we can get smarter with a credit card.

First thing first, a credit card is an interest free debt for 45 days. The credit limit is decided by your credit card company, based on your usage, profile, their risk policy etc. When it is available for 45 days please do not pay as soon as you swipe the card! I had a client who would pay his credit card 4 times in a month. Why? Because, his grandfather had told him  – never to be in debt. Principally, I do think the grandfather is right, but administratively it was an over kill.

Please utilize the facility and pay a 4/5 days before the due date. Up to 5 days delay also doesn’t hurt anybody, but, the collection team will bug you and you shouldn’t get further lazy and delay further! Even worse, forgetting can be very expensive.

In the current scenario, RBI has announced a three month moratorium for all repayments including credit card bill payment. Further RBI has  assured that availing this moratorium will not adversely affect the borrower’s credit score or affect the risk classification of the loan. However, this is meaningless for you – it is EXTREMEMLY profitable for the bank – they will be charging you interest, so stay away if you do not need this “facility” which is meaningless and EXPENSIVE.

Some tips to use your credit card smartly:

1.Opt for a card that allows you to convert your points to air miles and encash them if you are a regular flyer. Access to the lounge facilities is an added perk, use it if you travel often. The food is surely better than the airline food!

2.Always say yes when there is an offer to increase your credit card limit. You need not spend that much but will come handy when you are dealing with an emergency. Let me explain. You bank with H…Bank. They have your corporate account, your salary account, and you have a credit card issued by them. This card has a limit of Rs. 20L. Your other card is from I…bank and you did not bother to upgrade from a Rs. 1L limit EVEN though they chased you. Now your company is going through tough times – and your banker shrinks your card from a Rs. 20L limit to a Rs. 4L limit because of the Covid-19 crisis. You are now stuck especially if you have a big medical emergency. So having 2 cards instead of just 1 makes sense. Both, with adequate drawing limits.

3. Pay your utility bills online using a credit card. You earn points for every transaction. These points can be used later. Mobile bills, electricity bills, property tax, insurance premium, etc can all be paid using a credit card.
4. I have a client who has a separate credit card allocated for paying insurance premiums. Between him, his parents, wife and two kids he has almost 11 different policies and he has one every month. The points that he accrues he uses it to buy movie tickets for his kids after their exams!
5. Most of the “millennials” these days use e-wallets to pay. But please understand you don’t earn any benefit, rather use a credit card and earn points.

6.If there is misuse of your debit card, the entire saving account might get swiped clean. But incase of a credit card the damage will be to the extent of your credit limit. When you are travelling overseas you can block your card so that there is no misuse.

7.Try not to link your savings account to your credit card. It is always wiser to not set up auto debits for your credit card bill payments. Use net banking to avoid cheque payments, but do it yourself. However, I do see people happy doing this too! The advantage of using a credit card is also that your main bank account is free of the clutter. All the clutter goes to the credit card statement – and some cards do an annual analysis of your expenses.

8. Opt for a credit card that suits your life style, spending patterns. Even if its a paid card, trust me you will earn way more by using it wisely. Use it wisely to reap benefits rather than misusing it or just not making any other use of the product!
9. Put a limit on the add on card and give one tour kids ( ideally 16+) too. Teach them by empowering. Let them learn to use a credit card responsibly.

Happy spending!

Ms Aparna Ramachandra
Founder Director
(www.rectifycredit.com)
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