|
April 24, 2000
- Banking
- Cards
- General
- Insurance
- Lifestyle
- Loans
- NRI
- Real Estate
- Taxation
- Travel
|
Making your card work for you
Larissa Fernand
A little bit of planning can go a long way in making your card work for you. Here are some tips to get you started.
- As far as possible, avoid using cash for any payment. Take advantage of the fact that you can access interest-free credit (assuming you settle all bills on time). Instead, park your funds in either 15-day or 30-day bank deposits, gilt, highly liquid or money market funds.
This becomes even more essential if the monthly expenditure on your card amounts to significantly high levels. Tap your savings only when the bill lands in your hands.
- A frequent corporate traveller? Make all your payments - airline tickets, hotel bills and entertainment - on your card. On presenting the bill to your company, you will probably be reimbursed in a day or two. The money reimbursed by the company can find its way into a 15-day deposit (if your due date is still far off, then opt for a 30-day deposit). When it is time to make the payment to the credit card issuer, your deposit will have matured, enabling you to make the payment.
Unconvinced? Assume your bill totals Rs 75,000, which you have settled on your card but which your company reimburses or has given you a hefty advance. Your credit card due date is still around a month away. Rs 75,000 in a 30-day deposit will earn around Rs 312 at a measly 5 per cent per annum. Small fry. But if you make even seven trips a year, you stand to earn around Rs 2,184. The icing on the cake: you don't spend a pie from your pocket. Your bank makes the payment, your company reimburses the money and you earn interest.
- Ever noticed how money vanishes into thin air leaving you desperate for the next paycheck? With a credit card, there is no vanishing act. The billing statement is a reality check. Instead of blindly settling it, study your monthly statement closely and you get a fairly good idea of your spending pattern. The next step, of course, is to change that pattern.
- Faced with a shortage of funds and have to revolve credit? Stop using the card since interest free credit will no longer be granted. Each and every payment is now caught up in the cycle. Use cash or employ another card till you clear your debts on this one.
- Timing of purchase does matter. Time big purchases in such a way that you get a longer credit line. The way out: make heavy purchases at the start of the billing cycle. The reason: banks generally prepare the bills a couple of days before the bill date. Purchases made at that time or soon after obviously won't be included in the very next bill. The result: a longer credit line.
Confused? This should help clear the clouds. Say your next billing is to be done from 21 September to 20 October; so your due date to settle the bill will be 11 November.
Purchase that home theatre you have set your sights on on 21 October, give or take a day or two. You will get free credit till 11 December, which is around 51 days.
Working on the similar principle, if you feel the need to have more than one card, try and ensure that the bill date and due date do not fall in the same period. Ideally, they should be around 15 days apart. In that case, you can make purchases depending on which card is close to settling time.
Tell us what you think of this information
|
