How to make money with Credit Cards !

NO!! I am not a credit card sales man pestering people with free life-time cards or enticing them with special gifts to buy more cards, and send them down a debt spiral, while I mint my commissions on way to the bank!
I’m just another common man who swipes his card day-in and day-out, at the groceries, at the petrol stations, at the super markets, and nudges around to pay the bills!
Over a period, I’ve developed some habits (or in corporate parlance “Best Practices”) with my credit card usage, which have not only helped me avoid the debt spiral; but also make money out of it!! Read on to know how!

1. Avoid paying interest on your credits!

The first step towards earning extra money from credit cards is to avoid paying interest on your credits!
Too many cooks spoil the broth!
Too many cards spoil your growth!!
Have a strict limit on the number of credit cards you have; and your overall credit limit.
Your overall credit limit (inclusive of all cards) should not over shoot your monthly income; else, you will have trouble paying your next credit bill.

2. Avoid cash and debit card transactions to the maximum

The next time you buy a mobile phone or the monthly grocery at the store, avoid paying by cash, pay by credit card instead.
First it helps in avoiding black money to a teenee-tiny extent. Secondly, and more importantly, your money stays in your account until you make the credit card payment (not for debit cards though).
This gives you extra interest on your savings account balance. Sounds petty?! Not really!! Let me explain…
The recent RBI ruling on savings account interest rate has the following key takeaways:

  • RBI has de-regulated the savings account interest rates; so, competition is heating up among the banks to increase the rates further (One bank has already raised the rate to 6 %!!!)
  • The savings account interest rate is currently 4%
  • The rate would be calculated at the end of each day, instead of the lowest balance of a month earlier (most of our account balances are low by the end of the month 🙁 )

Therefore, if I buy, say an iPhone for, Rs.30,000 on October 1 using my credit card, my credit statement would be generated by the end of the month.
So, this 30K bucks stays in my account, until I make the payment at the end of the month. At say 4% interest rate, this works out to close to Rs.100/- per month (@4%, each Rs.10, 000 earns an interest of Rs.1.01 EACH DAY!!!)
So, that’s extra money as interest from your purchase!!
Note: Before swiping, make sure the vendor doesn’t charge any service charges; most don’t; but it’s always safer to confirm.
While using for fuel, go for banks which have tie-up with your credit card company so that you don’t have to pay surcharges.

Also Read:
Must have features in Credit Card
Silly ways to use Credit Cards

3. Delay paying your credit card bill until the last few days

This is the next vital step towards earning extra money – pay the bills at the RIGHT time!! Earlier, I used to settle my credit card bills soon after I make a purchase. But, as I realized how much I can earn with additional interest, I delay my payments until the last days. If my due date is 15th of a month, I don’t pay until 13th or 14th; so that I can earn savings account interest during the grace period as well. With net banking and mobile banking, payments are cleared in seconds, so there is no worry of cheques not clearing on time or national holidays!!

4. Negotiate increasing your credit payment cycle

By now you would have realized that longer the grace period, the more you can delay the payments; and more the interest you can accrue. So, negotiate with your bank and try to increase the grace period. Recently, I upgraded to a higher end card, and my grace period shot up by 10 days. Now, my half-yearly interest credits are growing more and more!!

5. Reward Points

Of course, there is always the delight of earning reward points for your purchase, and en-cashing them for exciting gifts!!

6. DISCIPLINE IS MANDATORY

A disciplined approach is of vital importance while using credit cards. Make sure, you set reminders on your handsets so that you don’t miss the payment dates! Better to pay your bills a couple of days before the due date, than rue missing the date and pay interests. Don’t be penny wise, pound foolish!!

And always keep a check on your spending. Having a credit card is no license to go on a shopping spree. The wealthiest are not those who earn more; but who spend less. Plan your monthly budget; and strive to stick to it. Avoid impulsive shopping – when you go shopping, do not buy anything beyond that you have planned for. Also, inculcating a savings habit would give great returns in the long run. Try these tips and your credit card will soon be making money for you!
Happy Swiping!!

This is a guest post by Arun K Krishnan – an IT Consultant, working with a multinational consulting company from Chennai. He’s an avid follower of TFL; and wanted to share his financial tips for the benefit of other readers. The views expressed herein are the author’s personal views.

39 COMMENTS

  1. Hi Hemant
    I think the most important point here is –
    6. DISCIPLINE IS MANDATORY
    My personal experience is that with credit cards discipline is very difficult to maintain.
    The use of credit card automatically increases when one is in a metro where it is possible to avail any service by using credit card.Not so if you live in a relatively small city where cash is preferred. Moreover in many places you have to pay extra for using credit card and you can not avail certain cash discounts.

    • Dear Anil,
      I completely agree with this “Credit cards discipline is very difficult to maintain.” It’s not only payments on time but usage – if someone can stick with monthly budgets he should try it. Credit cards are double edged swords.

  2. Hi Hemant,
    Thanks for sharing this post on Credit Card.
    I want to add couple of more things here.
    Recently i did some research work on google for cash back cards and have come up with couple of cards where you can get 5% cash back on:
    1> supermarket retails shops like Big Bazaar, Reliance Mart, lifestyle, shopper stop(Standard Charter manhattan card)
    2>For utility bill cash back there is a cash back card with Citi bank.
    3>For dining cash back upto 10% there is a card Trump Gold card with kotak.

    I know too much credit card is not good but I use it sensibly and pay full balance every month.

      • Hi Hemant,
        If someone is aware of pros and cons of using credit card, I feel there is no harm in caring three different credit cards for different kind of cash backs

        Ankur

    • The problem with cashback cards is, most of them come with Annual Fees. The Annual Fees take away the 5% cash back that you save.
      Try and negotiate with zero annual fee for life on a cash back card.

    • can anyone plz tell me that how someone get cashback?
      does it been adjust in your next statement directly?
      or like reward points, it have to redeem from your credit card customer care?

  3. Nice Article… And I have been following this approach for a long time…
    One should assess there monthly requirements (not the one off big purchases). For example fuel for vehicle, medicine, groceries,mobile recharge, insurance payments etc. Evaluate cards that give maximum cash back in terms of reward points(actual cash is best) and then apply for the same. I have 3 cards but the one i use 90% of the time is Citibank Indian Oil Card. Main features Rs 4 for every Rs150 of fuel purchase(Indian Oil) and Rs 1 for every Rs 150 of other purchase. No annual fees (very imp as fees reduces the benefits). The points are adjusted by just a email in your statement with fuel purchase. 100 points = 100Rs

    When i do a big purchase i.e. Rs 10000 or more, I buy the day the credit card statement is generated and place the money in a FD for 45 days (max no of days before you have to pay bill). Some have 50 days also.

    Also watch out for offers with different sites as well. SBI cards currently have 1-3% cashback for purchases made in Oct.

    Ideally one should not have more than 2-3 cards. 2nd and 3rd card usually serve as backup when the swipe machine does not work or they have only visa or master cards.

    Regards
    Vijay

    • Best approach.
      Another advantage of wisely using cc is to build a good credit history. Helps in getting better loans deals (as an when needed).
      Abbas

  4. @ Arun / Hemant,

    Quite an informative article regarding use of Credit Cards… I agree with all the points you have listed above regarding sensible use of Credit Cards. Since 2005 am having cards of various bank and I use them as Charge Cards.

    Never had I paid a single penny as Interest / late Fee. I use Debit Card once a month only to be eligible for Free Accidental Insurance offered by ICICI Bank.

    I schedule payments, thru Net banking, on the due date or a day before due date. It means no worry of skipping Credit Card payments.

    And to maximize the benefits from rewards points and Cash Back I use several cards: –
    1) SCB Titanium Super value – Mobile, Utility Bills and Fuel; 2) Citibank IOCL Titanium – Fuel; 3) Citibank Shoppers Stop FC Titanium – Shoppers Stop; 4)ICICI Big Bazar – Big Bazar; 5) ICICI Sarovar – Sarovar group hotels; 6) Kotak Trump – IRCTC, Movie, Restaurants; 7) SBI Lifestyle – Lifestyle Stores (Co Branding discontinued); 7) ICICI Platinum – Airport lounge privileges, Visa Platinum Offers.

    All the above cards are Free for Life and without any annual fee. I have many cards so I have taken Card Protection Plan from CPP India

    All said and done I must THANK YOU guys for advising regarding “Negotiate increasing your credit payment cycle”. I never knew that I can have a say in increasing Credit Payment Cycle.

    Now, I will request all my banks to extend my Credit Period as I always pay on time. 🙂

    • @ Pankaj / Arun / Hemant
      I had/have multiple cards, cancelled a few and got new ones and NOW Maintaing only 3 cards……… WHY ?
      Got the BILL GENERATION Date during begining of month (1st card), mid-month (2nd card) and last week of the month (3rd card), each having 50day credit period, ensuring whenever I use my card, I get max credit period upto 45-49 days credit.
      Use Wisely based on the bill generation date, AGAIN follow all the advises given above and SAVE SAVE 🙂

  5. Good article! I know a lot of my friends and relatives who are ‘scared’ of using credit cards. If one is disciplined he can earn as the article says. One more suggestion I pay all my insurance premiums running into lakhs for policies through credit cards and earn thousands of reward points. Earlier I used to pay through net banking.

    • I first utilize the 30 days grace period given by insurance company and then pay by credit card. This way I get credit period of 80 days (30 days grace period from insurance company and 50 days from credit card). Also get loads of reward points as I pay 100000 as insurance premium.

  6. Hi nice read, i always pay my cc bills next day after i receive them on my email that is almost 20 days before the due date, i thought it was good to pay ur cc bills early with all those hidden interest and penalty charges, now i will wait till few days before my due date and pay the cc bill. thanks for the post

  7. To read this article i changed my mind from staying away from credit card to apply for a suitable one. Gr8 ideas for a financially sound lifestyle.

    Thanx a lot to also those who shared their views to add more value to this article.

  8. Hi
    I’m a govt. employee, my DOB is 20/03/1983,Rs.3100 is deducting from my salarly & I want to know that how much pension pm will I get after retirement.
    Thanks

  9. TFL is a great site. I was in search for some SIP articles and came across this website. Find TFL worthy than many other blah blah sites. Great work team.

    Coming to above article, the Rules to be followed are great.
    I also used to track each swipe in an excel sheet with few details like – Place/Shop, Date and Amount. Also keep the bills until the statement is generated. This help me to verify my spendings against the statement. Also i strictly restrcit my credit/spendings to 1/3rd or below of my monthly salary.

    In this way i have found that, for fuel spedings they are taking a small amount even after the surcharge waive off.
    For example, 1015.02 – 11 = 1004.02.
    I am using HDFC platinum card.

    So as suggested above, Discipline is mandatory with a little tracking too. It will hardly take a 5 minutes from you to enter in an excel. But that help you to save 10’s to 100’s to 1000’s in long run.

  10. This is really a nice article.I too have been using credit cards using similar lines and have never paid interest.
    And My cards have kept on upgrading.I now have platinum started from silver…and that too all life time free.
    But I never thought about increasing the credit period ..Should write or talk to banks regarding this…
    thnks

  11. I recently got HDFC Bank GOLD Credit Card. It offers 0% fuel Surcharge & 1.5% Cashback on Utility Payments. But it limits to Rs. 500 CASH BACK in a month. Upon reading your inputs, I think that I could got better offers from other banks (with reference to Mr. Pankaj, reply # 11). As my cc is ONLY 2d Old, should I return it to the bank? What shall be the FINANCIAL IMPLICATION of this act?

  12. The interest rates on credit card loan is quite high in India. Banks are the real gainers in this. In US Discover cards will give you 0% balance transfer for 18 months. But in India its not the situation. There is also one third party service 2urhelp.com that transfer your credit card purchase to your bank account, for that they will still charge 4% of the amount. Such services are helpful when we need cash in emergency and that to equal to credit card purchase limit not to the cash withdrawal limit.

  13. Thanks a lot Hemant, that was of great help!

    I was planning to buy credit card(my first!!!), kindly guide me which one will be best suited. Majorly, my expenses would be in groceries, fuel, electronic gadgets and other daily usage of a common man. As I have researched, I think lifetime credits cards would be apt for me with no annual or buying charges. Plz suggest few. Many thanks in advance.

  14. Hi,

    i just wanna know if we are making delay in our credit card bill for more than 3 three months bcz of some personal issue. In that case whats the harmful effects that bank can take on the customer?? increasing the interest, except that is there is any law and case problem will come to the customer by the bank. please provide the solution for this problem. my friend is facing the problem, she couldnt pay the credit card bill, bcz she lost her job. now her situation is very critical.

    Thanks in advance.

    Regards,
    Revathi A

  15. Hi all,

    I would like to add my experience, might be useful. Having two cards with different billing cycle will add more time to your credit period. e.g. I have two cards 1) ABC bank card with billing date of say, 5th day of the month, and another card 2) XYZ bank card with billing date of say, 25th day of the month. In practice, I use ABC bank card between 6th and 25th day of the month, and XYZ bank card between 25th of current month till 5th day of next month. Thus, I get extra credit period by leveraging two billing dates. Sometimes, you need to negotiate with bank to set billing dates as per your choice.

    Apart from this, try to keep different brands of cards such as Mastercard, VISA, Amex. This will expand your benefits in terms of offers, rewards, accessibility etc.

    Use credit card wisely, its not bad until you are habitual or credit. Always keep your bills below 30% (at max, however not every month) of your salary.

  16. i am not sure if this works for all credeit cards, i use sbi credit card whose penalties are huge compared to other ones. You can simply book a train ticket in IRCTC worth Rs. 10000 or ( or whatever you wish ) and once the payment is approved just refresh the browser to make sure the ticket is not booked, but the payment is done.

    So what happens now, the deducted money will be credited back in 5 days to your credit card. SBI credit card considers it as a credit to your account that means if your credit card bill is 10k , You have paid your credit card bill if you do this after your bill generation. I suggest you make some payment through savings account and for the rest you can apply this trick. You need to pay 1.8% of surcharge.

    By chance if the ticket is booked quickly, you can cancel it, losing your cancellation charges.

    please let me know if you have better tricks

    • Basically you are using your credit card to pay your credit card bills !

      Ideally 50% of your card value can always be tricked like this ..

      One more suggestion – Always book waiting list tickets for incase they get booked the cancellation charges are minimum.

  17. Monthly my take home salary is 27k iam looking for credit card which suits my requirement can any one suggest me best credit card based on my following requirement
    1. there should be no joining fee and annual fee.
    2.mailny i ill use card for filling fuel in my byke.
    3.to buy electronic goods on emi based.
    so please suggest me best credit card which suits my req.

  18. @Siva- You can go for Citi bank Indian Oil card. It suits your requirement:
    1. No joining fee, and annual fee is waived off if you transact more than 30k in a year, which can be achieved very easily.
    2. The trasnsaction charge will be waived for fuel top up and you will get enough reward points which can be redeemed for free fuel.
    3. Most of the stores accept Citi and HDFC card to covert transaction into EMI.

    However, its might suggestion only, there might be some new banks offering some better. Check before you apply.

  19. @Siva- You can go for Citi bank Indian Oil card. It suits your requirement:
    1. No joining fee, and annual fee is waived off if you transact more than 30k in a year, which can be achieved very easily.
    2. The trasnsaction charge will be waived for fuel top up and you will get enough reward points which can be redeemed for free fuel.
    3. Most of the stores accept Citi and HDFC card to covert transaction into EMI.

    However, its my suggestion only, there might be some new banks offering some better. Check before you apply.

  20. My application was rejected. Credit Sudhaar was my choice. Initially they were slow. But their counsellors were able to handle all my queries. I will give Credit Sudhaar a positive review

  21. Hi Arun,

    Its really a useful information to all. I am following regularly to pay my credit card at the correct time without delinquency. Credit Card is really a good tool for us if we used in the correct way otherwise it will kills us. Please, share more information about the Credit Card features.

    Thanks!
    Nandakumar.V

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