How You Can Too Make Money Using Credit Cards?

All You Need To Know About Credit Cards To Make Money

Did you know that you could make money using credit cards? Sounds impossible? Most of the people are scared having credit card and using it. The reason is not difficult to find. We have seen people getting into debt traps and paying exorbitant interests on their credit card money. The fault is not with the product but with the use of it. Let me make it clear in the beginning that credit card debt is the worst debt and if you are not careful and disciplined, it is easy to get into debt troubles. However if you are smart and disciplined, you can end up making money using your credit card. And for records, I myself have made dining table, got cash gift coupons, watched free movies, got discounts in restaurants and many more benefits using credit cards.  So if you would also like to get the enormous benefits and make the best use of credit cards, keep reading. 

WHAT IS A CREDIT CARD?

A credit card is a plastic card issued to make payment for the goods and services without having to pay immediately from your own pocket i.e. on credit every month within a certain limit called credit limit. It’s a very convenient way of making payment to pay your bills for your shopping telephone, mobiles, utility fuel etc, rather than carrying cash in your pocket. The user has to make the payment after the credit card bill is generated before or by the due date. If the user fails to make complete payment he/she has to pay penalties and the applicable interest which is usually exorbitant.

In other words you get a kind of loan for your spending free of cost for a certain time period i.e. till the due date of payment of  your credit card bill. However if you are not careful about using your credit card and abuse it, you may get into an expensive debt trap which can prove extremely detrimental to your financial health. On the other hand if you are smart and disciplined, you can get good value and benefit from the usage of credit card. And using credit card can be quite rewarding thing.

So what are the things you should know about using credit card for your own benefit and avoid the debt trap. Let us first know more about credit card.

Who issues the credit card?

Credit cards are normally issued by banks or institutions that are authorized to issue the credit cards. Each and every credit card is a part of a payment network such as Visa, Master card, Diners club and so own.

Who is eligible to get a credit card?

Every credit card issuer has their own policies and terms & conditions for the eligibility criteria. These generally include income level, kind of profession/occupation, location of residence etc, these standards are set by them to have a sort of security so that the user will have the ability to pay back the money that he/she is going to spend from the card.

What is the rate of interest charge on credit card?

Credit cards are the most expensive mean to take a loan the monthly interest rate on a credit card normally varies between the range of 3% to 4% which on annual basis works out to be 36% to 48% or even more in certain cases.

What types of credit cards are available in the market?

There are many types of cards available in the market today because of innovation being done by the banks/institutions and the marketers. Each card comes with its own set of benefits. Some cards come free of cost and without any annual fees whereas some charge joining fees and annual fees. Then there are premium cards which are available to either higher income group people or people with good credit history and higher spending.

Let us see the types of cards:

Ordinary/Regular: Cards: Every credit card issuer has a basic credit card which comes with some basic features and benefits. Normally such cards are free of charge and do not charge any annual fees.

Premium cards: Normally named as Platinum, Titanium, World etc, these care may or may not charge the annual fees and often offer higher credit limits and benefits. As discussed earlier, these cards are offered to higher income and higher spending group of people with good credit history.

Co-Branded Credit Cards: These cards are normally issued by a bank in partnership with other merchant/product or services sellers like airlines, oil marketing companies, retailers etc. Examples are like Citibank has Shoppers’ Stop credit card as well as it has another card co-branded with Indian Oil. Similarly ICICI bank has co-branded card with Hindustan Petroleum. The user normally gets higher reward points or in certain cases special discounts for making the payment with the co-branded card at the specific merchants.

Corporate Credit Cards: The corporate houses normally have to make payments for their different types of expenses like hotel bills, air tickets, car rentals and so on. The banks issue the credit card to these corporates depending upon their financial health and their credit worthiness.

Things you should know about credit cards to avoid the unpleasant situations and to get the maximum value and benefits.

Credit Limit: First thing you should know about your credit card is the credit limit that it gives you i.e. the maximum amount that you can use on your credit card for one month.

Cash Limit: You credit limit also includes the cash advance limit i.e. the amount of cash you can withdraw. However, do not withdraw the cash ever from your credit card. As we discussed earlier, the rate of interest on a credit card is normally between 36% to 48% and the moment you withdraw the cash, the interest charges start immediately and till the money is paid back, the continues. Beside there are normally transaction charges on top of the interest rate that you have to pay. Just in case, you need cash, try other ways like getting personal loan as it comes at normally from 14% to 24% though still high but much cheaper than taking cash from the credit card. You should withdraw cash from the credit card only if you are not able to get cash from any other source.

Billing Date: It is the date when your credit card bill is generated. This is other important thing to know and remember so that you can plan your purchase or spending accordingly. I will also show you later how you can get the maximum benefit out of your card by knowing the billing date and make the best use of it.

Payment Due Date: This is the most important thing to know with regard to your credit card. This is the last day by which you must pay your bills or make full credit card payment if you want to avoid the penalties and exorbitant interest rate. You miss this date, and you’re liable to pay the penalties and interest rate.

Rate of Interest: You should also be aware about the rate of interest that your credit card issued charges you in case you do not make the payment of your bill.

Minimum Payment Due: When you receive your credit card statement, it shows you all the transactions that you have done in the previous month, total amount due, due date and the minimum payment to be made. This is the area where most people make the mistake thinking that they don’t need to make the complete payment and they need to make the minimum payment only. And they make the minimum payment only without realizing that they are being levied the interest  on the balance payment. And it keeps going on and they get into a debt trap. Please note that you should make the complete payment of your credit card every month religiously before or by the due date to avoid the pitfall.

A word of advice with regard to using credit card. We have discussed the exorbitant rate of interest which is charged on credit card. So you can judge yourself that if you are not careful and disciplined how fatal a credit card debt can be to your finances. So, make sure that you do not abuse your credit card and spend unnecessarily just because you got a credit card.  You should consider your credit card just a convenient mode of making payment of your spending rather than a reason to spend on thing which you don’t need or can’t afford to buy. You should spend only that much on you card which you would have otherwise spent  had you not have the credit card.

How To Get The Maximum Value Out Of Your Credit Card?

1. Earn interest rate on your money while you use credit card money free of cost!

You can earn interest on your money while you use credit card. Surprised? Yes! you can earn interest on your cash lying in your bank while you use credit card to do your shopping and make payments for other expenditures through your credit card.  Let me explain. The credit card issuer gives you normally an interest free credit period ranging from 48 days to 55 days. This means you can spend the money with your credit card and the payment has to be made by the due date after your credit card bill/statement is generated. However it depends when you make the purchase and when the bill is generated and the payment due date.  Let me show it you with an example. Let’s say your credit card statement date i. e. the date on which your credit card bill is generated is 5th of every month and the payment due date is 25th of every month. So if you spend Rs. 10000 on the 6th January, the bill will be generated on 5th February and you will have to make the payment by 25th February as that is payment due date. So in this case you are using the money of credit card free of cost where as your Rs. 10000 lying in bank earns you interest for the same time period. (Also note that your money lying in your bank savings account earns interest on daily basis now). So that means your Rs. 10000 will earn you interest from 6th January till 25th February which is cool 50 days. But make sure you make the payments on time to avoid the penalties and exorbitant interest charges.

2. Reward Points: This is the other way to get value from your credit card. Almost all the credit card issuers have reward point programs for their credit cards. These reward points can then be redeemed for gift vouchers for shopping malls, dining, clothes, accessories, books, charity or even may be converted to air miles. So make sure you are aware about the reward point system of your credit card and make the best use of it to get the most out of it. The reward systems are not same for all the cards. So you can compare the reward point programs of different cards and try to get the best possible. As per my knowledge, Standard Chartered Bank’s Manhattan card is having one of the best reward program.


3. Build good and strong credit history: This is very important and if you continue to make your payments on time without any default, you can build a strong credit worthiness. The benefit of having a good track record is that you can easily get other loans like home loan, car loan or personal loan easily and may be even at lesser interest rates in case you need any of such loan. So make sure you make the payments on time not only for your credit card but also for other loans if you have EMIs going on.

So go ahead and use your credit card confidently and make the most of it. Be disciplined. Choose to be smart and intelligent with your money. After all it’s Your Money Your Way!


P.S. I was featured in Economic Times Wealth paper for using credit cards smartly and making money. 

Be Smart & Intelligent With Your Money.

Your Life! Your Money! Your Way!

Source: YourMoneyYourWay.in