Earlier credit cards were a strict ‘NO’ since we were not aware of the hacks and there was very less awareness of personal finance. But nowadays there is so much useful information around, using which we can save and also earn from a credit card. But using a credit card requires strict discipline, one must follow the do’s and don’t before using a credit card. If used abruptly, one can mess up the finances and credit score. So read on to find some of the credit card hacks and start applying them.
Below mentioned are some of the hacks that you can apply if you spend using a credit card.
1. Make a fixed deposit of estimated monthly expenses
One can use a credit card to cover an entire month’s expenses, whatever can be done using a credit card like shopping, grocery, paying utility bills, etc. Make sure you have the estimated monthly expense already in your bank account. Try to make a fixed deposit of that amount till the bill payment date, assuming we have 30 to 45 days of the grace period. If we can manage to keep this amount in a fixed deposit for at least 30 days, we can earn some interest on that fixed deposit.
2. Pay the entire credit card bill
Pay the entire credit card bill every month, there is no second thought on this. If you pay only the minimum due you are liable to pay huge interest to the bank which will damage your personal finance goal. Paying the entire bill also keeps your cibil/credit score within limits which in turn shows your creditworthiness. If you need a home loan or a loan in case of an emergency, your credit score and loan repayment tracks will be analyzed. If your credit score is on the higher side you can get a loan with fewer interest rates compared to the person whose credit score is low.
3. Spend 20 to 30% of your credit limit:
Let’s assume your credit limit is $1lakh so ideally you are supposed to spend only 30% every month i.e. $30000 to show that the credit utilization is not high and the credit score should not go down. But in a month let’s say you spent $80k, then you can pay $50k before 2 to 3 days your bill gets generated. Since you have already made a payment of $50k your bill will be generated for $30k.
4. Used the entire credit limit in a month, now what?
This credit card hack is quite useful if you use the entire credit limit in a month, it shows you are more reliable on credit cards and can negatively impact your credit score. As suggested in the above point, you can settle the entire used amount before the bill is generated. So when the actual bill gets generated it will show outstanding as 0 and your credit score will not get impacted.
One thing that needs to be kept in mind for the above two points is that whatever amount we spend using a credit card we must always have the actual amount handy.
5. Multiple credit cards:
Let’s assume a scenario, where you already have had a credit card for quite some time now but some other bank is offering a new card with more offers and more credit limit. Should you take it? Yes, you can opt for the new card (keeping in mind all the precautions we have discussed while using the credit card)
What about the old card, should you keep it active or close it? The answer is to keep the old card active because the older the card the better cibil/credit score. Also closing an old card and getting a new one shows some fraud might have taken place on the old card or some suspicious activities might have happened. You keep the old card active and downgrade the old credit card from a premium to an entry-level card where the annual charges will be low.
6. Waiving off the annual charges:
We have to pay the annual fees or maintenance charge every year for the credit card. There is a way you can get these charges waived. You can call customer care and convince them to waive the charges. You can mention that you’re a loyal and old customer and have not defaulted on a single payment. If you are really a genuine customer most of the time they can waive the annual charges to retain the customer.
7. Make use of rewards point:
One of the most important things we ignore is to utilize the reward points. We do not bother to know about reward points that are accumulated on credit cards. There are a lot of options that one can do with reward points like getting cashback, discounts on flight booking, or redeeming points on shopping sites. And for all this, you do not have to pay anything. Why leave free points?
8. Do not use a credit card in below two cases:
Do not use a credit card to withdraw cash from an ATM, since interest will be charged from the first day with no grace period and the interest charges might go more than 30%, wait there’s more 🙂 and also you might be charged a processing fee between 2.5% to 5%.
Do not use a credit card to recharge any digital wallet on any e-commerce site or any other site, because recharging a wallet can attract 1.5 to 3% additional charges.
All these charges seem very less like 2% or 3% but in the long term if you calculate all such charges it will definitely be a huge amount. And it’s our hard-earned money why waste even a single cent? It is recommended to track, monitor and check the bills closely as there might be some charges that are applied to you that you are unaware of. By checking the bills you can make a note that let’s say for example – if you recharge a digital wallet you are charged some fees so next time you won’t recharge it using a credit card. The above credit card hack will only work if you have the strict discipline to use a credit card.