Sunday, July 25, 2010

Using Credit Cards well

I am quite surprised by the fact that there are several people who have no idea how Credit Cards work. First of all, most of these them think that if they have paid the ‘Minimum amount due’, they can pay the ‘outstanding amount’ whenever they feel like, and no extra amount needs to be paid.

I had 3 such discussions with different people. The first one had splurged huge amount of money on his credit card and paid half the amount. He thought, he will pay the balance next month but he did not know that he will be paying interest to the tune of 2.5 to 3.5 % per month on the outstanding balance.

Second one had spent a few thousands on his card, and paid back most of it, except Rs 1000. He had linked his account to the credit card, so the ‘minimum amount due’ was debited every month to his bank account. He thought he just needs to pay Rs 1000, but the fact is he would be paying huge interest per month on the outstanding balance.

Well, I got my first Credit Card when my first salary account was created. I was scared of credit cards then, since I had heard too many stories of people ending up paying huge amounts of interest on their cards. So, I did not use it for an entire year. Then I moved to a different city and started getting to know the ‘credit cards’ better. So, I took the initiative and used it. And well, there has never been looking back thereafter.

Somewhere in the middle, I had spent a lot of money on my card but over the years I have learnt to limit my expenses and work around the cards well.

So, the rule of the game is you should always memorize the statement and due dates well. Say your statement date is 20th of July, so once your statement is generated, the best time to use the card is immediately after that. So, you can use it on 21st, 22nd, 23rd and so on. This amount that you have spent on your credit card will feature on your bill only on 20th of August and the due date before which you need to make the payment, will be somewhere around 5th of September, so you will have ample time to pay back! Easy.

Also, it works well if you use only 1 card, or maximum 2. It is easier to remember all important dates plus you accumulate all points on a single card, which you can redeem for several benefits!

So, use your Credit Card intelligently and enjoy the benefits!


  1. oh come on.. you will put the banks out of business with all your sensibility!! :P

    I know a guy who came to US from Cameroon 5 years ago. He was told this is the land of the free. His bank gave him a credit card. He is still repaying what he spent in the 1st month...!!

    PS: If you want more cards, take them from the same bank - it helps during repayment. How long have u been working?

  2. It is better that the banks go out of business, rather than I getting stuck in financial crisis!

    I don’t use multiple cards. They are just there. I have also done balance transfer in the past from one bank to the other, then I realised who am I kidding! I’m spending much, much more than I wanted to!

    But now I am in complete control. I just stick to one card. Repayments are easier to remember and I’m also able to avail all my points in the same card. And got upgrades too because of the transactions being high.

  3. Hey Amrita, are you also beaten by credit card woes? Well, you learn I did.

  4. Hmmm... If you have a card that gives good perks, it makes sense to use it all the time... but if different cards give benefits on different purchases, it makes sense to use those cards for those specific purchases... e.g. one card for Fuel and one for groceries and one for electronics (that's how I do it and the rewards are great) I got the payments adjusted near to my salary date - this ensures I'll have money to repay the card without fail....

    Ofcourse, once I got a card that had 0% interest for 1 year and everything went for a toss after that and I started to think like you - KISS philosophy - keep it short n simple :-)

    You forgot to tell me how long have u been working :-)

  5. Ha...Ha...Ha….I did not forget. 5 years!
    And well, I am really not so good at working around so many cards. I have done it with 2, and I bring out the 3rd one ONLY if they offer discounts on books on that card. Otherwise, stick to one card.