Credit cards are often viewed as a convenient payment tool or a means to earn rewards, but their potential goes far beyond these conventional uses. Beyond the typical swiping for purchases, these plastic companions offer unexpected strategies that can significantly enhance your financial landscape.
In the hustle of daily life, creativity often takes a backseat. Surprisingly, credit cards hold untapped potential for financial enhancement. With a well-crafted strategy, these cards can significantly boost our financial well-being.
Let’s understand the five effective methods to achieve just that by intelligently leveraging and managing our credit cards. Here are five unexpected and creative ways to leverage the power of your credit card:
5 Uncommon Credit Card Uses You Never Considered
- Score Free Financing
All people have a major expense looming, whether it’s a significant home renovation or unexpected car repairs. It’s a financial challenge that requires attention, yet you’re reluctant to dip into your hard-earned savings or be saddled with hefty interest charges. In this case, the strategic credit card uses offers a promotional 0% Annual Percentage Rate (APR) comes into the picture.
Choosing credit cards in India from reputed banks with an extended promotional period can be a financial lifeline. This enables you to essentially borrow funds interest-free for a predetermined duration, granting you the flexibility to manage the expense without the looming burden of interest charges. It’s akin to securing a no-interest loan for a specific period, affording you the time and space to address the expense without immediate financial strain.
- Manage High-Interest Debt
Navigating high-interest debt can feel like an uphill battle, especially when dealing with accumulating interest that seems insurmountable. Yet, your credit card might hold the key to providing relief in the form of a balance transfer.
Transferring balances from a high-interest card to a new one offering a 0% introductory APR can significantly alleviate the strain of compounding interest. While a balance transfer may involve a nominal fee, the potential savings on interest payments far outweigh this initial cost.
This strategy allows you to consolidate and manage your debt more efficiently, directing your payments directly toward reducing the principal owed rather than being largely absorbed by interest charges.
- Invest for the Future
Looking beyond the immediate gratification of cashback rewards lies an intriguing prospect: transforming these earnings into a stepping stone for financial growth. Instead of treating cashback as incidental funds, consider redirecting these earnings into investment avenues such as retirement accounts or a diversified investment portfolio.
The beauty lies in the principle of compounding. What may seem like modest returns from cash back can evolve into substantial contributions to your long-term financial aspirations when invested wisely. These earnings, when given time to grow within an investment vehicle, have the potential to snowball into a substantial asset that significantly bolsters your financial portfolio.
- Boost Your Credit Score
Your credit card is far more than a transactional tool; it’s a dynamic instrument that can actively contribute to enhancing your creditworthiness. Skillful management of your Credit Utilisation Ratio (CUR) holds the key to positively influencing your credit score.
Maintaining low balances relative to your credit limits demonstrates prudent financial behaviour and can elevate your credit score. Additionally, strategically requesting a credit limit increase, if managed responsibly, further improves your CUR. This step not only provides you with more available credit but also enhances your ability to manage credit responsibly, potentially garnering an uptick in your credit score.
- Streamlining Expense Tracking
Imagine your credit card as a dedicated tracker for your expenses, offering an intricate yet user-friendly way to monitor and manage your spending. By consolidating a majority of your expenses onto a single card and practising consistent and timely payments, you not only steer clear of interest charges but also gain a comprehensive understanding of your spending patterns.
The key here lies in actively leveraging the features offered by your credit card provider’s online platform or mobile application. These platforms serve as a dynamic hub where you can meticulously review each transaction, categorise expenditures, and gain valuable insights into your financial behaviour. Regularly scrutinising your card statements allows you to not only track where your money goes but also spot any irregularities or unauthorised charges swiftly.
Different Types of Credit Card
Here’s a breakdown of the different types of credit cards in India:
- Basic Credit Cards
Description: These are entry-level cards suitable for beginners. They offer low credit limits based on income and are straightforward with minimal rewards or additional benefits.
Key Features:
- Low or no annual fee
- Basic rewards, if any
- Simple terms and conditions
- Low credit limit
- Secured Credit Cards
Description: Ideal for individuals with poor or no credit history, these cards are issued against a deposit made with the issuing bank. They assist in building credit and may offer rewards.
Key Features:
- Credit limit tied to the deposit amount
- Low joining fees
- Fair rewards for spends
- Opportunity to earn interest on deposits
- Rewards Credit Cards
Description: These cards offer reward points for eligible transactions, allowing users to accumulate points that can be redeemed for products/services from a catalogue.
Key Features:
- Reward points for spends
- Bonus points for meeting spending thresholds
- Annual fee waivers on certain spends
- Easy redemption of accumulated points
- Cashback Credit Cards
Description: These cards provide a percentage of expenses made as cashback for specific eligible spends. Cashback percentages and categories vary among cards.
Key Features:
- Cashback on eligible spends
- Additional rewards or points on certain expenses
- Welcome benefits for new cardholders
- Waiver of fuel surcharge at select stations
- Travel Credit Cards
Description: Tailored for frequent travellers, these cards offer benefits like air mile rewards for flights, travel insurance, lounge access, and low foreign exchange markups.
Key Features:
- Comprehensive travel insurance
- Access to domestic/international lounges
- Low foreign exchange markups
- Complimentary flight tickets annually
- Business Credit Cards:
Description: Meant for companies to manage business expenses, these cards provide benefits like loyalty points, cashback, and easier segregation of business expenses.
Key Features:
- Loyalty points for business spend
- Rewards and cashback on eligible expenses
- Simplified tracking of business-related costs
- The responsibility lies with the company, not individual cardholders
Conclusion
While credit cards in India are often seen as a means of spending or earning rewards, their versatility extends far beyond these roles. By strategically employing these five unexpected tactics, you can transform your credit card from a simple payment method to a powerful financial tool.
However, it’s crucial to exercise caution and responsibility when exploring these strategies, ensuring they align with your financial goals and capabilities.
