With the number of credit cards in India crossing 20 million, most middle-class individuals have access to a credit card. However, intense competition and a multiplicity of offers have made selecting a card a much more complex process than it was in the past. While it is natural to select a card based on one’s card habits, it also makes sense in some cases to alter one’s spending patterns to get the best out of the card. Here are 10 suggestions on how to get the best out of your piece of plastic.Free for life is not free
Whether you do not have any card or already hold half a dozen, chances are that you will receive dozens of free offers at shopping malls, petrol pumps and even railway stations. Do not accumulate cards, even if they are free for life. Even if you do not transact, you may still incur liability merely by losing a card and asking for it to be hot-listed.
Co-branded cards may have little value
There are several dozen co-branded cards in the market. Banks have issued cards in association with oil companies, airlines, supermarkets, hotels, telecom, educational institutions, charitable trusts and insurance companies among others. The purpose of a card is to have a single payment mechanism for all establishments and multiple cards defeat this purpose. Besides, most people would be buying airline tickets probably once or twice a year. Go for that co-branded card where you are likely to transact the most, not the one where you get the biggest discount. It is not without reason that co branded cards with oil companies have the highest volume.
Gold is not the best
The days when possession of a gold card symbolised a high standing achievement through success are gone. With banks being more and more liberal in issuing gold cards the snob value has been substantially eroded. For the cardholder too, the gold card provides little value since the offers are mostly in the form of discounts on high-end hotels, esoteric destinations and luxury goods which may not be on the shopping list of middle-class buyers.
Besides, if you could afford such stuff you would not be looking for deals anyway. Also, the annual charges on gold cards are much higher.
Points can be misleading
Most banks offer points for every Rs 100 of purchase. Some banks try to lure potential customers by offering higher points than their rivals. But, it is important to know what these points translate into before making it a basis of choice. For instance, a card which offers a Rs 300 gift voucher for 500 points is clearly misleading customers.
Never use your credit card for credit
This is the golden rule of personal finance which has not changed over the years. It holds true even if you desperately need to buy something and do not have the means to go for a personal loan. Interest rates on credit cards are more than double the rates on a personal loan. Your card company may tempt you with a higher credit limit, but, ultimately it is the cardholder who has to foot the bill. The same goes for withdrawal of cash from ATMs using one’s credit card.
Widen your card usage
Reward points on card spends act as hidden persuaders at times, sub-consciously goading cardholders to spend more to increase points. It is possible to maximise points without increasing monthly expenditure by using one’s cards for payments where traditionally one has been paying by cheque or cash. Several cell phone companies and insurance companies are now accepting card payments without imposing a surcharge. By using your card for such payments you will not only gain more points but also get advantage of the free credit period.
Last day payments
Last day payments are best avoided as the cost of missing out is much higher than the credit that you get for a couple of days. Besides, last day payments often lead to billing disputes as card companies assume the date of payment based on the date the cheque has been credited. If the last day falls just before a series of holidays there could be a problem. However, card companies have to accept the date of deposit as the date of payment. As long as you have dropped the cheque on the due date you are within your rights to demand cancellation of the late fee charges imposed for the cheque being credited late.
Reminders
Technology now enables banks to automatically sms text messages for due date reminder, notification of payment received or confirmation of large transactions. The last is particularly helpful as it lets you know immediately if your card is being misused. Most banks offer this service free.
Buying insurance
Card companies are best placed to offer excellent deals on products and services where the intermediation cost is high. In services such as health insurance the discount offered to cardholders is substantial. If the cardholder does not hold any health cover, such schemes are an affordable option. But, there have been several service issues in the past since the card company does not help if there is a claim and cardholders have to deal directly with the insurer who may be located at a distant place. Besides, in health long-term relationships make a difference because insurers tend to raise issue of pre-existing diseases whenever there is a claim on a new policy.
Security
Always retain the transaction slip until you receive your monthly statement. Strike a line across blank spaces on charge slips to ensure that the amount can’t be changed. Keep a separate record of your card numbers, expiry dates and helpline numbers to report a loss quickly. If you have multiple cards, particularly co-branded cards carry only the card you will use that day.
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