Use Credit Cards a Lot? Five Tips to Save More

Amit, a Bangalore-based entrepreneur, was a frequent traveler. He was spending for all his ticket purchases with his debit card until a friend suggested him to go for a travel-centric credit card. Amit applied for such a card, which collaborated with various domestic and international airlines offering discounted fares. Now, he could save a lot of money on his travels as every rupee spent on booking tickets and accommodations got added to his card's air miles, helping him save on his next buy.

In addition to this, Amit was able to relax in some of the most exotic airport lounges free of cost, something he earlier used to pay for.

Like Amit, many individuals today use credit cards smartly as a powerful money saving tool. If used smartly, you too will find it quite easy and effective.

Here are five ways in which credit cards can help you save money:

1) Using rewards points but not reward cards always

You already know about reward points on credit card. Different card companies have different point systems depending on the type of the card, which you can claim for cash discounts while purchasing from their collaborated retail chains and sites.

But this does not mean that you should always opt for a reward card. Many reward cards come with higher interest rates as compared to regular cards. Credit cards give you an additional edge of saving money, but if you are in a habit of not paying the balance in full, don't go for one.

For example, some regular cards charge 1.49-2.45 per cent interest per month for late payments. The same bank's reward cards, however, charge 3.45 per cent on late payments, which actually means you are not saving but spending more, if you are paying only minimum.

2) Choosing the best card

Choose a card that specifically suits your lifestyle. If you travel to your office in your own vehicle every day, a fuel card is a much better option than a reward card. On the other hand, if you don't use your vehicle much for travelling and live in a joint family, a shopping card will be beneficial as the entire purchases of your house can be streamed to it, provided that you repay before the due date. If you are not an avid shopper, a cash back card will be a good option for you, as you can claim instant cash discounts instead of waiting for centrain points to get accumulated. If you are a frequent air traveler, a travel card as a secondary card is a must have.

3) Saving on air travel

If you are a frequent flier, a travel-centric credit card is a must-have in order to get incentives on every ticket purchased and hotel booking made. The air miles accumulated can be swapped for your future trips. Using a travel credit card not only offers discount on the basic ticket charges but also an additional brownie for your next buy.

Cards usually pay up to 10 miles for every Rs 100 spent besides features like 10,000 miles with your first spend, 3,000 miles on card renewal etc., which is a good deal if you swipe often for travel and hotel accommodation.

4) Catching up all good offers

Don't just ignore all those promotional mails ending up in your inbox. Some of them might help you in saving, especially those from banks and credit card companies. Card companies run several offers from time to time, and many during festive time. Don't just run behind them and say yes to every one of such opportunities that comes to your way. Instead, make use of those relevant ones. This includes discount on shopping, dining and for swiping at some partnered spas and even at your fitness centre.

5) Playing it safe

Let us say you come across a high yielding equity investment opportunity. But you don't have the money with your right now to invest. Don't let the chance go. Withdraw against your credit card and pay back very fast.

Here's an example:

You withdraw Rs.50,000 using your credit card from an ATM. The advance fee charged by your bank will be 2 per cent, which means you will have to pay Rs 1000. The interest rate for the same is 3.25 per cent, which translates to Rs.1625 a month. When you get your next month's salary and are repaying the cash advance very soon, even if you pay Rs 1625 plus Rs 1000 as a fee for it, you are still a gainer if your fund yields 16-18 per cent returns.

At 16 per cent returns, you earn Rs.8000.

Caution: This is not an idea to be tried by everyone. Do it only if you are financially disciplined and good at paying bills promptly.

CONCLUSION

Credit cards come with a number of schemes and offers to woo customers. It is easy to get carried away with these. But an impulsive spending only put you in wasting than saving. Having multiple cards will not help saving as you can't accumulate your points on one. So don't fall into the trap of attractive sign up bonuses offered by cards.

BankBazaar.com is an online loan marketplace.

Disclaimer: All information in this article has been provided by BankBazaar.com and NDTV Profit is not responsible for the accuracy and completeness of the same.