How to make best use of credit cards in India

Credit cards can be an amazing tool to manage your finances, get good deals and some excellent rewards. All you need to do is understand some credit card hacks and be on lookout for deals!

However, before starting on how can you make the best use of credit cards, you need to be sure if credit cards really suit you or do you tend to lack financial discipline if you have access to credit cards. If this is the case, it may be wiser to avoid credit cards altogether.

(You may also be interested in – You should stop using credit cards now if … )

Here are 5 ways you can get the best out of credit cards.

How to make best use of credit cards in India

1. Have multiple credit cards in family

Having multiple credit cards can help you make the best use of the offers that may come on any credit card. For a family with moderate credit card usage (a 5 digit number, in Rupee terms), 2-3 credit cards should be good, though you may go for 1-2 more if you can manage so may cards & get the best deals.

For example, I use an ICICI Credit Card & an American Express/ Amex card. In addition, there is a HDFC Credit Card being used by my wife. The Amex (Gold) card which I use gives me extra 1000 reward points on using it 6 times a month for Rs. 1000. The value of these 1000 points is like Rs. 400, if I redeem it for statement credit using their 18 or 24 Karat gold as statement credit. And they have some good joining offers too!

ICICI and HDFC Bank credit Card often have tieups with eCommerce portals like Amazon, Flipkart etc., especially during sale period & you can get some good cashbacks/ discounts. In addition, there are good offers on SBI, Axis & several other cards which often have exclusive deals. Some cards by Standard Chartered/ HSBC/ Citibank give discounts/ deals on Uber/ Grocery shopping/ movie tickets/ fuel etc.

(You can explore cards and benefits in depth here)

I do miss out on some offers by not having some types of cards, but given the moderate spends that I think I have, I don’t feel the need to have more than 3 cards. (or maybe 4 or maybe 5 – the debate can continue!). Some of my reasons (as of now) are – limited usage of cabs/ availing other offers in supermarkets/ watching movies or travel relatively infrequently etc. In addition, usage of other cards may lead to me making sub-optimal usage of my Amex rewards (and hence, not much incremental benefits overall).

However, if these realities change, so may my card usage.

You can compare & choose which credit card best suits your needs and choose your card mix accordingly.

2. Maximize credit free period on your credit card

Most credit cards have typically 45-50 day credit free period. So, on an average you can pay your bill around a month after your expense (approximately average of 15-45 day period, when you may need to pay your bill)

If you have multiple cards you can choose your card usage based upon which bill you need to pay off last. This, subject to all other factors (offers, reward points etc.) remaining same. So if your Card 1 has billing cycle from 1st to 30/31st of a month & your Card 2 has billing cycle of 15th to 14th (of next month) then you can majorly use Card 1 from 1st -15th and Card 2 for rest of the month. This, assuming, the rewards & other factors being same.

However if reward structure is different across cards, usually using the card with better rewards may be a better choice.

3. Evaluate reward points on your credit card

Getting reward points is one of the major reasons why people go for credit cards. Different credit cards may follow a different convention for reward points. Typically 2 reward points for Rs. 100 spent (with 4 points = Rs. 1) is the most common construct.

While evaluating cards, look at the cash equivalence of the rewards rather than just points. Also be on lookout for bonus points (typically associated with a particular type of usage). And yes, be on on lookout for exclusive brand/ retailer tie-ups. They may be much more rewarding than rewards!

4. Look out for co-branded credit cards

If you are a major user of a particular service you can go for co-branded cards. These can be linked to travel, fuel, entertainment etc. Citibank – Indian Oil Card or American Express – Jet Airways cards are some examples of co-branded credit cards.

You can get some really good deals and rewards on using co-branded credit cards.

5. Never, ever default on your credit card payment

If you are using credit cards to get rewards and other associated benefits, last thing you would want to do is ruin the benefits by defaulting on your credit card bill. Credit card defaults are expensive & the interest rates are high (often to the tune of 3 percent per month or so). Keep doing this consistently, you can ruin your credit score and lose a good chunk of money.

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If used judiciously, credit cards can help you save good amount of money via interest free credit period, reward points, cashbacks and discounts etc. And if you are a savvy user, this all can just add up!

Have any more credit card hacks in mind? Do share!

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