Despite the emergence of payment apps, credit cards remain an important means of transactions. It is a preferred choice when it comes to raising short term debt, for many people. The offers and deals thrown by payment apps though have attracted many customers, credit cards are not a dud on that front. Many millennials still undermine the role a credit card can play when they are looking for saving that extra buck.

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Here are five ways a credit card can help you save money:

Deal mania on online e-commerce portals

This could be the first thing that comes to mind when you think about credit cards and savings. If you have more than one credit card, judicious use of these credit cards can fetch you good discounts. Most e-commerce players tie up with credit card companies. You can expect special pricing with added discounts, interest free EMI and other such offers if you are holding on to a credit card of certain enlisted issuers. Before transacting on the e-commerce platform do check if there are such special deals available for your credit cards.

Reward points

It has been ruling the minds of the credit card users for a long period of time. Each credit card issuer has its own reward programme and each reward point fetches a value anywhere between Rs 0.2 to Rs 0.75 for most cards. Some issuers even allow the conversion of credit card reward points into cash to settle credit card bills. However, many issuers offer gifts and gift coupons in lieu of reward points.

To make the most of the reward points, it is better you spend some time studying the reward point structure and next best alternative to conversion of reward points to cash as experts advise so. But if the issuer does not allow this, pick the right gift coupons after understanding your needs. “Reward points come with expiry date. Use your reward points to get things you want. Otherwise go for super-store coupons that let you buy groceries,” says Ramalingam K, founder and chief executive officer of Holistic Investment Planners.

Co-branded credit card

Next level of reward points could be the co-branded credit cards. If you are a frequent user of certain services, such as supermarkets, travel by air, co-branded credit cards can come to your help. They let you earn points or air-miles which can be used to settle bills at the co-branding partner. These cards also come with additional benefits such as access to airport lounges, additional discounts and additional insurance.

Co-branded credit cards however do not offer any other major benefit other than transacting at the co-branding partner. Hence one may be careful while opting for one such credit card. “You will keep getting all the information about deals and offers on such cards. Do not go overboard with it, buy what you want. Remember you have to pay the bills,” says Ramalingam.

Cash back

Most credit card issuers keep this as an alternative to the reward points driven credit cards. Not much is talked about these cards, however they make a lot of sense when you have limited money to spend. Some of these focus on cashback on utility bills while the rest focus on cashback at enlisted partners such as super-strores, fine-dine options and e-retailors.

However, there is a catch here. Most of them do have a long list of terms and conditions attached with the cashback. For example, some do prescribe a minimum transaction size of say Rs 750 to qualify for cash back. Some do restrict the overall cash back payable across heads in a month. Some banks restrict the number of transactions eligible for payment of cashback.

You should know the rules of the game, before you start playing to ensure that it becomes a win-win situation.

Credit score building

Rarely young individuals are bothered about credit score building. For the beginners, credit score also known as CIBIL score is a number that represents the past history of loan repayments of the individual. The number stands between 300 and 900. A high number denotes responsible use of credit in the past and most lenders do prefer to lend to individuals with high credit score.

Credit cards are nothing but short term loan facility and timely repayment of credit card bills ensure good credit score. Prakash Ranjan Sinha, an investment trainer based in Mumbai says, “Be prudent with your credit card usage. Lenders do check your credit card statements before sanctioning large loans such as home loans.”

A high credit score attracts the lender and you can negotiate a good deal on your future loans.

“Prudent use of credit card is an enabler for most us. It helps you transact and live a better lifestyle. But misuse of the same can land you in a debt trap,” concludes Sinha.

Disclaimer: The views and investment tips expressed by investment experts are their own and not that of the website or its management. Users are advised to check with certified experts before taking any investment decisions.

Source: Moneycontrol.com

First Published:Aug 2, 2018 4:26 PM IST