2 Credit Card Tips I learned from others

POSTED BY manish ON July 16, 2012 COMMENTS (123)

Do you want to know some credit card tips which you can use in your life ? In all probability you must be holding a ICICI, HDFC or SBI Credit Card and must be wondering how to use it effectively ! .  Credit card is used by almost everyone now a days and utilizing a credit card features is an art -I would say. It needs discipline, attitude and the right mindset to be used. However I came across 2 very good credit card tips, which were discussed by few readers on the comments section and hence this article bring forth those tips and tricks to you. These following tips are really good, but only for those who want to really squeeze out the benefit of their credit cards and not for someone who likes to keep it simple. Let’s see those credit card tips:

Credit Card Tips 1 – Making short term Fixed Deposits

Most people know that by the end of the month, they will get a credit card bill and they will have to pay a good amount of money towards it. Now imagine this situation – You will most probably have a good amount of money in your savings bank account which you know would be utilized towards paying off the credit card bill and you make sure that the money stays with your account. You don’t spend it or invest it anywhere because it already has a purpose and it also improves your credit score and report

Now the simple tip here is, that just see how much is your average credit card bill each month. It can be 10,000, 15,000 or 20,000 at times, but if you know that generally the maximum you get is around 20,000. Then instead of keeping that money in your bank account, you can just do a short term fixed deposits in that start of your billing period, so that instead of earning mere 4% in a saving bank account, it will earn some 7%. The idea is to create around 90 days of fixed deposit each month for your average credit card bill amount. So what will happen that from 3rd month, you will automatically get those FDs matured and you will have the money ready. I said 90 days so that the interest rates you get are better. I can see that my ICICI bank is giving 7% for 91 days deposit. If your bank provides good return in 30 days, better make 30 days deposits.

Important : Do this only if your bank provides the online facility of creating fixed deposits and you would like to get better interest for your money in short term along with eagerness to pay off your credit card debt in full every time. At time this can look like over optimization, but its up to you. Now if you like it, take it, else let it go. Thanks Suhas for this trick .

Credit Card Tips 2 – Have two credit card with different billing cycle

You can get the maximum credit of 55 days on a credit card if you make the purchase in the start of the billing cycle and have a grace period of 25 more days (30 + 25 = 55). But you can not always make big purchases in the start of the billing cycle to get maximum credit, a lot of people make this mistake because they do not understand minimum balance in credit cards . So in that case the tip is to have 2 credit cards with two different billing cycles preferably having a gap of 15 days between them, you can use one credit card for first 15 days of the month and another one in the  second half. So for example you can have credit card A which has billing cycle from 1st Apr to 30th May and another credit card B whose billing cycle is from 15th May to 14th June.

So this way you can use the credit card A in the first half of the month and B in the second half. Note that though this involves 2 cards and requires a little tracking , but it will really help someone who uses the credit card a lot and would like to get benefit of maximum credit period almost all the time. Thanks Vareen for the tip.

What do you think about these credit card tips? Are they over kill!

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123 replies on this article “2 Credit Card Tips I learned from others”

  1. Pinakapani says:

    Hello, see heading, That should be “LEARNT” not “LEARNED”… 🙂

  2. Ramaballav Routaray says:

    Dear Sir

    I was trying to purchase a laptop through flipkart.

    Payment was made through SBI card. Amount deducted. But order was not confirmed. A message was displayed – “SBI declined your request”.

    I communicated with flipkart with transaction ID. But payment was not recieved by them.

    Can you pls share your views, why this happens? & what should be the next course of action for a customer, if credit card company does not refund the debited amount?

    1. Hi Ramaballav

      This is very specific query which you should follow up with the concerned authority only. We wont be able to comment on that

      Manish

  3. Kumaresan says:

    Hi Manish..

    One question for you or may be you can get an answer. Its a known thing that credit cards are prone to fraudulent transactions when they are missed. Why is that not many banks have a photo credit card? why is that there is no pin for the cards?? why cant RBI mandate these to banks, instead of asking a photo id proof for transactions of more than 10000Rs. Is a photo Credit card so expensive ?

  4. Vijay says:

    Just wanted to update on one tip which i have been using.. I have icici bank platinum card. They give payback points for the spends. I use my credit card for almost everything right from groceries,bill payment to petrol. So, my average spend on my card comes to 15000Rs per month. I use my accumulated payback points to pay my vodafone bills. So im actually getting my mobile bill free using the credit card. Sometimes i buy jewellery for my wife which i plan during the start of the billing cycle so say for example i buy jewellery for 50k i get free 45days interest free credit. To make the payment safe i have already been doing a 30 day FD which easily pays me 7% interest as pointed in this article earlier.

    1. Good to hear that Vijay !

  5. Ram says:

    Another tip is to get a card that redeems points to payback outstanding (adjust the outstanding balance not redeem for vouchers etc). I use Indus Ind card and in a year, I use my points to payback a min 15K of outstanding. Its like almost having 1-2% discount on your entire spend. For me this is a substantial amount and in last 8 years I would have saved almost 80-90k by using my points to pay back. Not many people realize this.

    1. Can you use the points to payback the outstanding in all the cards or its just a feature with IndusInd card ?

      1. Ram says:

        Not all credit cards offers this facility. That’s the main reason I had opted for IndusInd (formerly Deutsche Bank Credit Card). Another similar scheme is when you take any Petrol branded cards (eg: citibank indianoil card). The points accumulated can be redeemed to purchase petrol. This is another effective way of using points.

        1. Thansk for that info !

  6. Sateesh says:

    Hi Manish,

    first one is unknown to many. thanks . i just did it… 🙂

    i became fan of your website… from last one month i started looking in to your website. now a days your website became a daily E-News paper for me. (almost reading all articles)
    which ever will be useful to me, i am implementing…

    a Big Thanks dude….
    Sateesh

    1. Thanks and good to know that Sateesh .. keep reading !

  7. Kantilal says:

    Resident foreign citizens cannot acquire credit cards in India. Is this true? Nor driving licences.

    1. I guess that might be true .. you can discuss this at our forum – https://www.jagoinvestor.com/forum

  8. atolani says:

    Idea of “Making short term Fixed Deposits” is darn good, But a better idea is to enable auto sweep in your account. with this anything above your threshold will automatically get 7% interest (approx).

    Lets say my monthly credit card bill is 15K & I would like to have 20K always in my account, setup a auto sweep for after 20K, it will save me from the headache of creating FD accounts on a daily basis.

    1. Yea .. sweep accounts are a good way of making sure FD’s are created automatically !

  9. Abhinav Gulechha says:

    Hi Manish

    You will agree that credit cards are well laid traps designed to cash in on default made by a person, which has a host of repurcussions.
    My wife is a s/w engineer and she had been part of a project to design interest calculations for a particular credit card brand and she was baffled at how complicated the calculations are:)….think of the lay investor..
    my only one advice is – keep 2 credit cards, but don’t use them, except in case of a emergency.

    1. thats a way of thinking , credit cards work on the principle of “95 people will enjoy and 5 will pay the price for it” , Its totally in your control if you want to be part of that 95 or that 5 . The benefits of credit cards are good enough to use , if one has self control and that dedication to pay on time and not over use it beyond limit , what wrong do you see in using the credit card .

      Another thing is in today scenario when you need to have a decent credit score , you need to build it and the best possible way is usage of credit card . What do you think about it , there are cases where people loan are rejected just because there was NO credit history at all , many of these people had this view of just staying from credit card for their own reasons like “Its not for me” , “Its dangerous” , which is more of your belief and nothing else I would say .

      What do you think ?

  10. Vijay says:

    Can we use 2 credit cards and use one to pay the other to get an unlimited credit?

    1. Swetank Saroj says:

      Hi Vijay,

      You can not do this kind of transaction; not the way you want.

      What you can do it a balance transfer from one card to another with a charge of 2% or other terms and condition applied by them.

      Hope the credit card company allow the transaction the way you want, even I will be happy. 😉

      Thanks,
      Swetank

  11. Ketan says:

    Whats the use of 1st tip? If you have money in bank at the start of billing cycle, then instead of making FD use that money for your purchases rather than using the credit card. Isn’t that better? I think credit card should be restricted only for emergency use and debit card is better for convenience during purchases.

    1. Anand says:

      I would say read the article again!

    2. Deepak R Khemani says:

      You can build up a good credit history, earn reward points and make some extra money by being disciplined, spend wisely and pay on time. That is what this article is all about, if anyone is not comfortable with credit cards or uses them for emergencies only it is perfectly fine, the article is all about managing your credit card dues such that every one wins.

    3. Ketan

      Using a credit card has its own advantages , like you can use the money for other short term use , your credit building will happen due to this activity, you can earn some reward points etc etc . the only thing is you should be disciplined enough to pay off the dues back on time !

    4. Dinesh says:

      Dear Ketan,

      as per me this is the bad idea, even if u have the money in your account suggest to use the card u can enjoy benifits

      1.By using the card u can earn the interest for the period of 45 days.

      2. you can earn the points on the cards which u can accumulate and you can utilise the same for the purchase of the required items by the way of redumption.

      in SBI the points will get lapsed after evey month but with HDFC u can accumulate the points and can redem and can shop ipads,mobile phones etc.

  12. Krish says:

    My working life transitioned from heavy user of credit card to abondoning them. Never defaulted any payments. An year back I have again taken a credit card primarily for the purpose of emergency during my overseas travel. However I could not bring myself to buy anything using credit card. I am so used to debit card.

    The reluctance of using credit card came from its billing cycle. My cash flows are always on haywire if I use the credit card. Many times I timed to get the 45 days credit and got it as well. However, some urgent stuff strikes during the payment at the end of 45 days and I struggle to clear the dues.

    After three such cycles, I went back again on silent mode for credit card usage.

    1. THanks for sharing your experience with credit card !

  13. Chakravarthy says:

    Hi,

    I’m a wealth manager at ICICI Bank. Some clarification on taxation:

    Fixed Deposits –
    You’ll add your FD interest to your individual income – hence, individual tax slab.
    Now, when you park in liquid funds and ultra short term debt funds the taxation is different.

    Liquid Funds –
    If you opt for Growth option (which suits if you are in 0%, 10% or 20% tax bracket), the income is added to your individual income – hence, individual tax slab.
    If you are in the highest tax slab, opt for Dividend Payout or Dividend Reinvestment option where in the MF pays 27.038% as Dividend Distribution Tax. The amount hitting you is tax-free.

    Short Term Debt Funds –
    If you opt for Growth option (which suits if you are in 0% or 10% tax bracket), the income is added to your individual income – hence, individual tax slab.
    If you fall in 20% or 30% as tax, opt for Dividend Payout or Dividend Reinvestment option where in the MF pays 13.519% as Dividend Distribution Tax. The amount hitting you is tax-free.

    (As on 1st April 2012)

    1. Thanks for that update 🙂

    2. Deepak R Khemani says:

      Taxation on LIQUID PLUS FUNDS is 13.519% which you have missed mentioning above which is a better option than short term debt funds where you will end up paying an exit load if you go out early which is not the case for liquid plus funds. Also all this is being discussed for Indian Resident individuals only, not companies not NRI’s.

  14. Ram Mohan says:

    One tip that I use is whenever I have a big bill to pay (say insurance) or some bonus amount through which I have to buy something, I immediately put this in a liquid fund (I have a dedicated fund for this called forecasted expenses). Then I use credit card to pay my bill to increase the credit period further

    That way I at-least get 50 days credit if not more

    1. Deepak R Khemani says:

      Please read my comment posted above under facebook login right on top

      1. Anand says:

        Profit from liquid fund is not tax free, as per my understanding.
        Only gains from equity fund is tax-free, that too after 1 year.

        1. Deepak R Khemani says:

          Let me remind you that under dividend reinvestment option in liquid plus funds the tax is deducted at source and the nett gains in hand are TOTALLY TAX FREE.

    2. Thats a short nice tip !

  15. Sankha says:

    Credit card always help if some one is disciplined. In my case:-

    1. I have two credit cards with 20 days gap in billing date which helps me as per point two.
    2. For point 1 : My Salary account is with sweep facility, so my salary 5 days after crediting sweeped into an FD. When I withdraw money in any form, it breaks partially. So when I pay my credit card bill getting a average credit period of 30 days, my money in FD gives return of 5.5%-6% on average. Even if some one does not want to that much involved, plain saving account interest on average 15000/- spend on credit card per cycle can give you free money of Rs 900/- (small but still useful 🙂 )

    3. Credit card rewards point gets you minor benefit too. On top of that, one of my credit card gives me 5% cashback on Pantaloons/Shoppers Stop/ Food bazaar etc. (on average free cash back of Rs 100 per month). Other one gives me 2% discount on utility/telephone bills (my average bill of landline+broadband+mobile is Rs 1400/-, so another free money of Rs 30 per month).

    4. One credit card gave me offer twice that I do not need to pay my credit card bill for 2 months. So that time, I get free credit period of 110 days.

    5. But most importantly, all benefits will be lost if one defaults/not pays. The cost of that in cards are huge. But I have not defaulted in payment once in last 2 years which should improve the CIBIL score.

    1. Thanks for sharing your experience !

  16. Siddhant says:

    That is a good idea you can actually make money from credit cards by playing the system properly…

    Here is my link for the same

    http://www.chintamoney.com/entries/general/make-money-with-credit-card

    1. Thanks for the link .. will look at it !

  17. For Tip 1, Systematic Withdrawal Plan from Liquid fund can also be used. This will give one a better flexibility for the deposits and earnings from liquid funds will be at par with FDs for longer deposits.

    In my case I just manually withdraw required amount 3-4 days prior to the due date if available balance in my savings account is not sufficient.

    1. Thanks for the tip of SWP ! .. You can use whatever works for you !

  18. I have an bad experience recently with my credit card..I like to share it..After reading if anybody has any ideas please suggest it..I have lost my credit card somewhere in petrol pump.I come to know when I receive an late transaction message with trxn of Rs.15000 in an branded jewellery shop.I would have caught the looter when I received the sms in on-time. I immediately called the jewellery shop and informed to hold the theif but he escaped in a gap of very few minutes.I have a clear recorded video recorded in that shop and I complained in near by are police station but after seeing all that they done investigation with petrol pump person..But later on they have not shown any interest due to small amount from their point of view..But I immediately called my ICICI bank customer care and told thats an unauthrozed transaction, but they approved and told to pay the amount on due date and I wrote several mails and gave legal notice but they never minded and I cancelled the card after paying the due..So is there any way to reimburse from bank or jewellery shop….

    1. Vandhana

      I dont think that jewellery shop has anythign to do with it, someone produced the credit card, and they honoured, and then the culprit escaped , what is the mistake of jewellery shop here .. You should have first informed this to bank and not the jewellery shop , that might have made sure that bank does something about it .

      1. Manishji,

        I have informed to bank only, but they refused within few minutes they have approved the transaction after the merchants approval. And also jewellery shop should get photo id proof for the trxn above Rs.10000 as per RBI rule but they failed. If I ask them they just give several answers due to manpower short or rush but finally I had lost my Rs.15000.

        1. 2 points

          1. When you go anywhere and make the payment for 10000+ , do you ask the shopkeeper why they dont ask for photo id and proof from you ? Just because you are affected this time, you are pointing to rules and regulations . Are shopkeepers really at fault here ? I am not sure if you really ask them when you shop for above 10k or not , may be you do , in which case obviosuly its a shopkeeper fault

          2. IN case of bank , again bank has to approve the jewelery shop transaction as they are accountable to them , not to you .

          1. Swetank Saroj says:

            Manish,

            I do not agree with your point.

            Its shopkeeper fault. They are supposed to follow the rules even if this not good for us. Many times the boarding pass of a flight or a ticket at a multiplex has been denied to me or my close ones cause they were not carrying the card used for transaction.

            These shops will start following the protocols only when they will be penalised by not getting their payments from the bank side.

            Why its always the common man fault or we have to bear for others fault..misseling of a product our fault ..a forged transaction our fault.

            Just now I have lost 330 rupees coz i never knew that a third party cash deposit or withdrawal from my salary account is chargeable..again its our fault coz we do not know…are we lame that we keep doing the same fault even after knowing????

            1. Swetank

              I am with you on this, you got me wrong .

              I am just saying that people do not raise fingers about these rules when they themselves use the card , but when some fraud happens with them, then they start asking why shopkeepers dont follow it . At other times it looks like a headache to them . Imagine how people will react when a shopkeeper tells them that they can not accept a card because there is no signature done at the back side, at that time we will get irritated , but the same thing looks important to us when its a fraud done with us and affecting our money . That was the point I was raising that one should act in all the situations all the times.

              Like you said that bank should not honour the payment to shopkeeper just because there is mismatch there, I agree that my point was wrong in my previous reply in that case .

            2. Swetank Saroj says:

              Hi Manish,

              I accept and agree with your point of view that normally we start complaining when we face a problem with us.

              I also agree that its a headache and inconvinient to show our ID card each time using a card. Most of us have seen the cases where a PNB or SBI debit card owner ask the person to enter their ATM pin on the machine rather than themshelves (they forgot the potential danger, the next person in Q can stole their card and use the same PIN)

              My only concern was to follow the rule, as the concerned Airline counter or a multiplex have the rights and many times they have denied the tickets coz of not showing the requested cards, as a result now people either carry the original card or a photo-copy as proof.

              I am just expecting the same from the shopkeepers; initially it will be a big pain and lot of chaos but after the initial phase everyone will get used to it and their will be less complain of headache as well as fraudulent use of cards.

              If its not happening; I would like to bring the paralence from your other article “Does Government work for Financial Services?”
              Is the bank and shops work in nexus, like never do a proper check at payment (identity of person) charge the card owner and get the payment; only a small number of people will complain so nothing much to lose.

              Thanks,
              Swetank

            3. I agree with the point in your last paragraph, once you start charging these shopkeepers itself , these kind of fraudulent activity will stop !

        2. Hmm .. as Swtank told you , better file a case now and tell them that you should get money because the bank failed to comply by the rules laid down !

    2. Swetank Saroj says:

      Hi Vandana,

      I exactly do not know how to help you, but below I am mentioned my views which may help you.

      First, every shop which owner a credit card have to match the signature on charge-slip with the signature on the reverse of the card. They can even ask for an ID-card for the proof of checking the owner of card (this has happened only once with me at a city 3 years back).

      Second, bank are not suppose to clear a balance where the signature on the charge-slip is not matching. You are authorize to ask for the charge-slip being sent to bank and it must have your signature. Now this is a tricky one, cause I know many people just hand over their card to their close ones and ask them to sign on their behalf; this will possible go against us in the above mentioned second point. (Thats why I never ask to sign or use my card on my behalf, rather accompany them to pay by my card, even its a pain for me)

      Third, always go for a CPP (card protection plan) it will cost you 1000 bucks annually but your cards are insured against the misuse. Once re-imbursement like this is equal to 15 installment.

      This is normally not advised, but every one free to take their own call: If you know you are not at fault and have been cheated. Default the same amount and close your card. Beware that this goes against your CIBIL score but you have atleast peace of getting back to the institution on your own way. Over a period of time you can correct your score. Although institution never informed CIBIL that a person has cleared the dues even for a forged payments and please give them extra points. Cancelling a card may also goes against our rating, I am not sure at this point someone more informed can help us.

      Thanks,
      Swetank

      1. Pankaj says:

        Vandhana

        You can follow Point # Two given by Swetank his ^ above comment. I think this would help you in highlighting the deficiency of the Merchant. Also, you may follow : –

        1) Use Complaint Resolution Matrix of ICICI Bank to escalate the complaint to higher ups. Escalation Matrix of ICICI is very very effective and it has helped me many times and I believe it would help you also
        2) Complain to RBI’s Banking Ombudsman against the bank. Rad Manish’s earlier article https://www.jagoinvestor.com/2011/04/banking-ombudsman.html
        3) Complain on Social Networking page of the Bank
        4) Take services of http://www.akosha.com

        Also, as suggested by Swetank and Manish (www.­jagoinvestor.­com/­2010/­05/­how-­to-­insure-­your-­credit-­and-­debt-­cards.­html) to avoid any such mishaps take Insurance on your Debit/Credit Cards.

        I don’t think defaulting on payment would be a good option; Manish may kindly advice on this…

        1. Mr.Pankaj,

          Thanks for yous haring about Banking ombudsmen and akosha.com..I have complained in akosha and lets wait and see and I will share again jagoinvestor after complaint is closed/resolved.Thanks for jagoinvestor.

    3. Swetank Saroj says:

      Hi Vandhana,

      I was discussion your case with a friend of mine and got to know the following experience.

      In 2009 my friends has lot his ICICI debit card and someone has used it for 6500/- (that was the only available amount in his account).

      The person checked his account statement pull out the details and file a FIR, after filling his case with the police he went to each shop and asked them to provide the details. Got everything photo copied and then sent the details to the Bombay Head Office of ICICI bank along with the copy of FIR. ICICI did an internal enquiry and finally reverse the 6500/- to his account. During this complete procedure he also got to know that this loss is normally taken out from the shopkeepers cause they have not followed the actual rules. (as mentioned in my other comments).

      Hope this may help you. So do not lose hope you may still get your money back.

      For other people:

      In case of a fraudulent or forged charges on you credit cards never pay that specific amount rather file a complain and keep in touch with the head office. The institutions are not supposed to charge you any interest for the disputed amount.

      Thanks,
      Swetank

      1. A lot of learning in this comment reply ! … great !

      2. Thanks Swetank..You are right and thanks for sharing..But I too gone to Police Station and a PC came with me and asked all details in Petrol pump and jewellery shop and I repeatedly get in touch with PS but the response is very poor and also due date came and after asking in credit care customer service reg approval of trxn I some what left the hope and I paid the hard earned of my amount and closed the card finally.I had very bad experience with ICICI bank credit card division.

        Thanks
        Vandhana K

        1. Pankaj says:

          @ Vandhana,

          Did u took up the case with RBI Banking Ombudsman. Now, they have introduced Online Complaint Process. Do try that once!

          @ Swetank

          Are you aware that Internet Based Transactions and Use of Counterfeit Card are not covered in CPP or any other Card Protection company?

    4. dr kishan says:

      Vandhanaji

      My suggestion to you is that first of all dont lose hope. RS 15000 is a lot of money. With perseverance I think you should be able to get back the money. Please understand that the process is painfully slow but if you are able to satisfactorily prove to bank that the shopkeeper was wrong then ICICI can chargeback the amount from the merchant and credit to you. I think you shouldn’t have closed the card of ICICI. Anyway I advise to make use of grievance redressal system of ICICI. the website is http://www.icicibank.com/Personal-Banking/pdf/grievance_redressal_policy.pdf
      Go step by step. Keep all documents like FIR, old statements etc at hand. Write a detailed mail to ICICI. Dont depend on telebanking. It may not be retrievable later on. Explain everything in detail exactly what had happened. Then wait for their response patiently. They are bound to reply to your complaint. Most probably they will NOT agree to you at the first instance. Then escalate the matter to next level. And so on. If you can prove to them that the merchant is at fault the bank might repay your amount to you. Was your card signed by you? (at the back)

      Dont lose hope and fight with all vigour. You shall surely win

      dr kishan

  19. santhosh says:

    what about the credit card charges one has to bear? Don’t we have to pay charges for having multiple cards

    1. Not always .. there are cards which does not have any charges !

  20. santhosh says:

    What about the credit card charges? Don’t we have to pay charges for the multiple credit cards?

  21. Suhas says:

    Manish,
    I have started one more thing “No credit Card month” once/twice a year to get the feeling of spending through cash/debit card or net banking.
    After starting spending through credit card you don’t feel that money is going through your hand/deducting right away reducing your balance, so you tend to buy more (which is the basic psychology on which credit card works)
    At the end is just one transaction you need to do anyway so you don’t recognise it.
    I think who ever feel like you getting trapped in credit cycle can think of this along with the FD one.
    Some who are very much organised & in control can off course ignore this.
    But believe me it really hurts to count the cash and give it over the counter which I have experienced it got me to think again why spending.
    So next time you buy something which is not a necessity then do cash transaction & check the difference. (My most painful case was a pizza worth 1K & mobile bill worth Rs 800/-)
    I always kept only one card but now I liked the 2nd tip and thinking of getting one more card….lets see currently I am in my “no credit month:)

    1. Suhas

      Thats good .. I can understand the experience you get when you pay by cash/netbanking 🙂

  22. rajan says:

    Hi, Just for your information.. an amount of 50k parked in FD for 90 days with 7% per annum will fetch only approx Rs.863/- ? does this help?

    1. Help in what ? What exactly is your question ?

      1. rajan says:

        I mean it will not fecth much…

  23. Chandra kumar says:

    Is there a way to withdraw cash from Credit card without paying 2.5% charges?

    1. Chandra

      No , its not possible , you need to pay the interest from day one !

  24. Suhas says:

    Thanks Manish for sharing my Idea with people.

    One of my friend told me one more Fab thing(cannot be called a trick though…:((….. milking the max out of the credit card.

    He has some friends who own big shops(above 5lac daily turn over so no charges for swiping) and have credit card paying facility.
    He just swipes his card there at starting of the credit cycle and the shop owner gives him CASH………:))

    He uses that money till the billing cycle and pays his credit card dues after the bill is generated, which is usually after 55 days.

    Pros
    Gets to use the money (4-5 lacs for 50-55 days without interest)
    Gets the rewards points and heavy redumption.
    Big amount for short term…..

    Cons
    But if you over do this you may be hurting your credit history and will be under IT scanner for sure.

    This is “illegal” too i guess, so donot follow it ……………Anyways,

    “Har ek friend Jaruri hota hai……….”

    I Stongly recommend not to follow this but just thought to share the extremes……….

    1. Thanks for sharing another tip ! 🙂

    2. Anand says:

      This is what the guy from ‘catch me if you can’ did… very old idea, but still works. And he did this in US in 60’s-70’s..

    3. Rashmin says:

      but in this entire process, i am feeling the person who is sweeping card he.she converting white money in to black and shopkeeper also need to show this transaction in his book so they also need to pay the tax on that.

      1. Also the shopkeeper has to pay the transaction charges to credit card company !

  25. Anand says:

    I always follow the 2nd tip. Interestingly, I was thinking about the 1st one.
    Instead of FD, I was thinking of liquid mutual fund, where there is no entry and exit load.

    1. You can do that , but the only issue is the ease of breaking it and the uncertainity it brings (lower uncertainity)

  26. Aparna says:

    I follow the 2nd tip regularly. The 1st tip is really good and will help me in generating money from the credit card. Will start following this tip also.

    1. Good to know it helped !

  27. Anbusivam says:

    Very useful tips, but one has to keep track of the FDs made regularly. I like the second tip and this is more practical. I alwas end up having to pay the bills at one single time which I could split with 2 cards.

    However, I am slowly moving towards becoming “No Debt” person in any point in time of my life. Not sure if I will really loose something great with the credit period that these cards give.

    1. Anbusivam

      I am not sure why tip 1 is not realistic . You made a FD for 25 days , then it matures and money comes back in your account, you make the payment of your credit card bill . Note that everything has to be totally online like ICICI .

      Manish

  28. Venkat says:

    On the first option.

    Isn’t there will be tax implications in case of first option? Effective yield for those in 30% bracket will be not be much (banks are smart enough :)). It comes around 5.5% after tax implication, and it is not much big figure for those in 20% too. There are few banks offering 5.5% to 6% on savings balance, and more over we get upto Rs.10,000/- from tax exemption in the fiscal on the interest earned on SB balance. Isn’t it would be good move to opt for SB account in these banks rather than going for FDs.

    Second one. Its worth following, however, it is coupled with billing cycles of our utilities, like phone bill, internet bill, shopping, etc…

    A wise use of credit cards can really help. Here is my case (though I don’t recommend). I was supposed to pay 40 K towards insurance premiums, but I have only 45 K in my account. During the same period one of a bank stock was at attractive price. I have paid the premium using credit card (with some processing fee about R.35/-) and converted that into EMIs (even though I have ability to pay in the next month). Calculatedly the stock returned a short term gain of 36% in five months period, and I have paid only 4K towards interest via EMIs for six months. Overall I could see 23% return after tax (I am in 30% bracket). [b]Your case may be different, assess all pros and cons prior to making decision.[/b]

    If a person is long term user of credit card with good CIBIL score, card lenders offering loans at better interest rates than personal loans. (Debt is sin in my opinion, but bringing this to notice to those who want to shot into feet bit calculatedly), apologies if it appears rude.

    1. prasanna says:

      the trick is dont put all your short term deposits in same bank single savings account. have multiple bank accounts with netbanking. so that your effective
      earnings of FD interest will not exceed Rs.10,000. you may feel hectic to have mutiple accounts. but it is simple if you have netbanking with transaction rights.
      you can transfer money between your own account with out moving any where

      1. Venkat says:

        Where ever you deposit, at the end of the fiscal you have to file these earnings. Do you want me to escape from filing these FD returns? Lol… IT guys are very smart, and when they catch us, may be after 10 years, we would need to pay, tax, interest on tax, and penalty. I have seen few of my acquaintances getting notices for the transaction about 10 years ago. Sincerity helps. 😛

    2. You are right in a way .. If it works in your case , you can apply it else there is no point . What you did in your case was a random one time event , I am not sure if some one can replicate it numerous times ?

      1. Venkat says:

        Yes, the decision to be based on pros and cons along with some risk. In the initial paragraph itself I said, “no recommendation”, many people fail at assessing the true value of an asset. I guess I need some correction in numbers, but there was some profit booking happened.

        Overall experience with credit cards are good so far. I am using SBI (5 years) and HDFC (one year). 🙂

  29. Premji Bhanushali says:

    There is another way also to maximise returns from savings a/cs. Nowadays Banks have flexi fix deposits scheme for savings a/cs. under which amounts above a particular cutoff balance is auto transferred to fix deposit (auto sweep) and as and when necessary, the required amounts from the fix deposit are transferred back to savings a/c. (reverse sweep). This gives maximum returns without any hassels. Different banks have different cut off limits. Enquire and find out e.g. Oriental Bank of commerce, SBI, Bank of Baroda. SBI and BOB may have lower cut off balances.

    1. Ram says:

      Is this Audo Sweep & Reverse sweep faciliites are available to ING Vysya & IDBI Banks?

      1. Premji Bhanushali says:

        An enquiry with these banks or their internet websites may give the information asked for.

      2. All the banks have it but with different names , contact customer care !

  30. Pras says:

    Hi Manish,
    I am already using both of these tips past 1 Year. Thanks for the Info.

    1. Good to hear that .. do see any impact of it or advantage ?

      1. Pras says:

        Yes, Definitely. Till now I made my credit payments in advance by 2 days. I HOPE this is helping me to get more offers on Personal Loans / Credit Card with life time free benefits. (This is my belief)

        1. Yes .. If your past is great . More and more companies will want to give you more loans !

  31. Dayanand says:

    Suggest Jagoinvestor to stay away from credit card.

    1. prasanna says:

      Agreed. We can make use of the interest free period of credit card.
      apart from that we should stay away from it. generally educated
      people purchase electronic goods which are supposed to have
      negative inflation i.e prices will come down if you purchase it
      after some time. so avoid using credit card if you do not have
      interest free period. also now a days all kind of shops online and offline
      accepts debit cards as well as sites allow netbanking

      1. Incase you are disciplined to pay off the dues in full and use your credit card like a debit card, then you can extensively use the credit card !

        1. Karthik says:

          I agree with Manish. I am using credit card for last 6 years. I have enabled auto debit the full due amount from my savings account. so, it ensures that full amount is paid and only on the last date for paying the due. I haven’t paid a single rupee as charge or fine.

          1. prasanna says:

            I agree with manish. But those who are using auto debit option credit
            card is a waste. you can directly use debit card itself in that place. we must
            make use of the interest free period

            1. Karthik says:

              I said, the auto debit, debits the due amount on last date of paying the due, which makes me enjoy the interest free period.

            2. prasanna says:

              yes i understand karthik thanks for clarifying

    2. Dheeraj says:

      If credit cards are used properly, by not getting lured by easy credit, loans etc.. these are very beneficial.. and you earn free points as well..
      Like I do utility payments, insurance premium, petrol purchase.. and then pay the credit card bill on time..

  32. Dheeraj says:

    I also have 2 credit cards and use as mentioned in point 2.

    1. Good to see someone implementing it !

  33. Karthik says:

    I have another tip related to Bill pay. Whenever I receive bills (telephone, internet, etc), I go to ICICI billpay, and select credit card to pay, and schedule the payment at a date which is just 1 day before the last date to pay the bill.

    But, I dont agree with making FDs from savings. Its better to have some amount of liquid money in savings for use (to invest in MF / stocks, when the market corrects).

    1. prasanna says:

      Dear karthik
      I have sbi netbanking and it offers 7% interest for just 7 days lock in period.
      by the word FD you are in the assumption that cash is not liquid. those days
      went off by the arrival of netbanking. if you locked your money for 7 days
      and need it urgently on the first day itself just login to your netbanking and
      use close option. you will get money credited to your account next second to
      your savings account

      1. Dominic says:

        I have SBI netbanking and I was looking for this FD creation option. I dont see this in my page. Do I have to turn on something?

        1. prasanna says:

          Dear dominic
          ensure that you get netbanking with transaction rights first with your
          branch. If you are able to do NEFT and funds transfers and bill pay
          online then you must be having it. go to requests tab after logging in
          you can see creation of e-TDR, e-STDR there

          1. Dominic says:

            Yes. It is there. Thank You.

      2. Velan says:

        Hi prasanna,

        Can you please let me know where in sbi netbanking is the FD facility available…
        I would like to use the facility…

        Velan

        1. prasanna says:

          Dear dominic
          ensure that you get netbanking with transaction rights first with your
          branch. If you are able to do NEFT and funds transfers and bill pay
          online then you must be having it. go to requests tab after logging in
          you can see creation of e-TDR, e-STDR there

        2. prasanna says:

          Definitely it is avilable if you have netbanking with transaction rights.
          you can open FD online and close it and preclose it online.just for 7 days
          you can get 7% of annual interest

      3. Muthu says:

        excellent one.. i will start doing this today itself.

    2. Karthik

      good to see your tip , it will make sure one never defaults

  34. Abhishek says:

    I follow the second tip for the last 4 years. Never read that before, just came out of my mind when I opted for the second card. The first tip is also useful, but needs pin point tracking of one’s finances. Let’s see if I can implement the first one also. By the way what are the tax implications for the interest on the short term fixed deposits?

    1. Naresh says:

      Well with reference to Insurance, I follow the first tip since last 5 years.

      I opt for a annual premium payment option and avail discount. Further, I create a monthly Recurring deposit for 1 year for the equivalent amount, so I earn 7-9 % interest for RD and 3-6% discount on Insurance.

      Which works out pretty well.

      1. Venkat says:

        It seems to be good option. I started RD (SBI e-RD) to pay insurance premium in this year. But my money locked for a period of 12 months. Doesn’t seems to be interesting to me. It may well work for others. I have opted RD this year to follow a discipline rather than rushing to pay during the due date.

        1. prasanna says:

          dear venkat
          you can use short term FD of interest 7% in sbi netbanking.
          short term deposits are applicable only when you dont have
          any other scheme to invest and just want to hold money in
          your savings account. in yes bank savings the default savings
          account interest is 7%

          1. Venkat says:

            Yeah, agreed. As I said, for a disciplined pay of premium, RDs do help. I did locked at 9.25%.

            But whether to go for RD, depends on person to person. For me, it is not a best option, if I can go for bit risk. See my other comment,

            https://www.jagoinvestor.com/2012/07/credit-card-tips.html#comment-47954

          2. Naresh says:

            Dear Venkat,

            U can pre-close ur RD anytime..! I do it whenever i need the funds urgently.

            1. Venkat says:

              @Naresh, thanks. I know this option. Atleast, I will use the amount to deposit in PPF, as it is low.

              @prasanna, agreed. RDs help to follow a discipline, for most of the people it works well, but for those risk taking it may not be ideal option.

              Another idea, start buying post office NSC. Buy these certificates at higher price in such a way that the yield can pay premium. Say, if we want to pay 50/- towards premium you need to by 100/- worth of certificate. Buy these certificates every year during premium payment time. After sixth year, the returns can be used to pay the premiums and reinvest the principal.

              I didn’t consider tax implications as they are complex. I don’t recommend this for risk takers. Consult a financial planner for better suggestion.

    2. prasanna says:

      Dear abishek
      just check my reply to Mr.venkat below

    3. It will be added to your income and taxed !

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