Don’t use a credit card, it’s a debt trap!!
A credit card only burns your pocket in the long term!!
Credit card is a capitalist scam!!
How many times have you heard these myths by the so-called experts? We don’t disagree entirely, but the underlying message that such floating rumors convey is that Credit card eats up your savings’ whereas reality today is quite a contrast.
Yes, a credit card can eat up your savings if you are on a spending spree. However, if you are smart at spending and budgeting, you can avoid mounting debt or high-interest rates charged on late or default payments. This plastic genie is only a financial tool, and a tool is as reliable as its master. When used responsibly and optimally, a Credit card can save money by various means- availing cashback, discounts, offers, deals, and building credit.
Today, banks offer a plethora of options in credit cards to suit every lifestyle and income. So, check your eligibility and select a card that meets your requirement. Here are the ways of how a credit card can make (save) money for you and answer the big question “Is using a credit card beneficial?”. However, the golden rule is never to rack up the balance and pay the bills on time.
How to save money using a Credit Card?
1. Rewards:
The most obvious benefit of having a credit card is earning rewards. Rewards can be in cash, gifts, or points, and every reward program has its system. Therefore, use a credit card to pay your bills to earn reward points on every purchase and redeem later. For example, a user with a card from a private sector bank offers 10x reward points on partnering sites like Flipkart, Nykaa and 5x reward points on non-partnering sites.
2. Cashback:
Many credit cards offer cashback with selected online and offline merchants. Certain co-branded cards have tie-ups with online shopping portals and can earn upto 5% cashback on total spending in addition to the discount offers. Banks offer many variants in credit cards. For instance, a cashback card from a prominent foreign bank provides 20% cashback on movie tickets. So, tickets for a family of 4 would costs Rs.500 and savings would be Rs.100.
3. Build a stable credit score:
Use of credit cards helps to build a credit score and a credible credit history. Maintain a no-default record and pay your bills on time to increase your credit score. A CIBIL score above 750 is an ideal score to get loans at a lower interest rate. Hence, you can save money on your credit card on loans.
4. Travel Perks:
Many credit cards allow you to earn points or miles to redeem for a free or discounted flight or hotel stay. Some banks offer a co-branded card that offers air miles that can be transferred to Frequent Flyer programs. Users with high-end cards can ask for assistance from the bank’s travel concierge for the lowest flight and hotel rates and redeem the points or miles against it later. Besides this, you can get complimentary access to select airport lounges. Another travel perk is the lower foreign exchange mark up fee, which can be a significant saving.
Pro-Tip: Always inform the credit card company before you travel out of the country, or else your card will be blocked due to fraud protection.
5. Shopping Discounts:
If you love shopping, then a credit card will help you reduce your bills through cashback or discounts, or both. For instance, a user with a credit card of a public sector bank enjoys a discount of Rs.2000 with no cost EMI or may get 10x reward points on partnering sites like Myntra, Amazon, Nykaa, or Limeroad. During shopping festivals, online merchants offer significant discounts, which helps you to save more money.
6. Fuel Purchase:
If you have a co-branded card with an oil company, then you can save on fuel costs. They also offer payback points, which can be redeemed later for fuel. You can also earn reward points if you spend a certain amount at the same designated petrol pump.
Another additional benefit is a waive off 0.75% fuel surcharge. Hence, the total saving is Rs.17.50 per Rs.1000 spent.
7. Pay Utility Bills:
Pay groceries and other utility bills by card to earn cashback or reward points. Some cards are lifetime free depending on your annual expense, while others have a low yearly fee. For instance, a card offers 15x reward points for online shopping and 5% cashback upto Rs.500 on transactions above Rs.2000 on Big Basket or Jio Mart.
8. Dining Perks:
If you are a foodie and love to try different cuisines, then avail the credit card offers. Many credit cards provide complimentary dining perks, such as a Zomato Gold membership that can get you upto 30% off on dining. You can also benefit from additional discounts with partnered restaurants.
9. Paying in the future:
A credit card gives you the ability to pay for your purchase today and clear the credit card balance at a future date. For instance, auto-pay your LIC by registering with the card company. LIC provides a grace period of 1 month. The policy is due on 31st January and including a grace period upto 28th February. Typically, the card company makes payment in the last week of the grace period. You pay the credit card bill in March, availing the benefit of 40-60 days and earning interest on the money parked in the bank.
- Fraud protection: Many credit card companies offer fraud protection. If you timely inform the company about the loss of card or theft before any fraudulent charges are made, then you aren’t held responsible for any fraud. The company will investigate the fraud, and if it is authentic, it will bear the liability. Few foreign card companies provide complete liability protection.
- Insurance benefits: Credit card companies offer accidental death coverage or fire protection on items purchased. The issuer will provide insurance cover without any premium. However, you need to meet specific spending requirements to avail of the benefit.
Bottom Line:
saving money is not refraining from spending but knowing to spend smartly.
A credit card can spell a bonanza on a user if used wisely. However, it is essential to select a card aligned with your spending to avoid any debt trap. A credit card is an indispensable tool with multiple opportunities to save money on your shopping, traveling, and mundane chores. We hope this guide helps make an informed decision, but if you are still in two minds, get in touch with our counselors (absolutely free) for some expert guidance.
