Engineer's Finance

I was thinking over the usage of Credit Cards. It is really a wonderful tool if we use it to our advantage. Since we screw up most of the things in life, Credit Cards adds to the woes. I would like to suggest few things about its usage and certain precautions of using it. Here it goes:

1. I would advice “You” to have at least two credit cards. The limit of credit should be equal to your current salary and other card should be less than double your salary. Ensure that both your cards does not have any annual charges or some other hidden charges. These should be free.

2. When applying for Credit cards, ensure that you get at least 50 – 70% of your credit in Cash. That means, if your credit limit is Rs. 20,000 then you should get at least Rs.10, 000 as cash from the bank’s ATM or branch.

3. Read carefully your offer documents before using your credit card. I will never blame the banks for charging “you” more or less, since everything would be mentioned in your credit card offer document. It is very important.

4. Behind the card, there will be CVV number. Just remove that and write down in a safe place or better memorize it. This is because when you give the card to waiter at hotel or some other person during some purchases there are chances that they might remember your credit card number, name, expiry date and CVV number and this is enough for them to do an online transaction. It is better to be safe than sorry.

5. Never make big purchases in cash until unless you get a huge discount or some benefit out of it. I would suggest you to make the purchases using your Credit card itself.

6. Make sure you use only one Credit Card per month for your transactions and never you the other one. And also spend your money in such a way that, you can pay back the entire amount you spent with in one month.

7. Purchase goods right after your billing cycle ends and always pay your bill just two three days before.

8. Don’t pay Interest at any point: This is the most important thing that I want “you” to follow. This is what I do and I am quite happy that it works perfectly for me. I have two cards and I make payments regularly and I have just paid only once interest in last two years. That is quite an achievement I guess. :). I always use one Credit Card (CC) per month, I make sure that I use up to 75% of the credit limit. When it comes to paying back, I firstly pay myself and then I pay my CC bill. If I am short of cash then I get the money from the other CC and pay the first one. Since two Cards have different billing cycle, it hardly bothers me. I keep juggling between these two cards till such time that I have enough cash saved up and pay the bill without any problems. This might look tedious but it is a piece of cake and trust me it works perfectly.

There are much more hacks of using Credit Card to our advantage. I think these should help you get started once you become a pro then we can discuss various things related to Credit Card.