A credit card is all about buying now and paying later. A credit card if used wisely can be a true friend in an emergency. Unfortunately, many people use credit cards to satisfy wants and not needs. Credit cards charge a very high rate of interest, around 24-36% a year. If you keep swiping credit cards for wants rather than needs, you will land in the debt trap.
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If you have more than one credit card, judicious use of these credit cards can fetch you great deals on e-commerce portals. Many e-commerce portals like Flipkart, Amazon, Shopclues have tie-ups with credit card Companies.
If your credit card Company has a tie-up with reputed e-commerce portals, you enjoy discounts; interest free EMIs and other bargains when you shop online. Check if your credit card has a tie-up with e-commerce portals and if you are eligible for any special deals.
Credit card issuers offer reward programmes and you can earn rewards when you swipe the credit card at the POS to make purchases. When you swipe the credit card for a transaction, the credit card Company earns an ‘interchange fee’ from the merchant outlet. The Credit Card Company shares a part of the earnings with you in the form of reward points.
This is done to encourage you to keep spending so that the credit card Company earns interchange fees and you earn reward points. Some credit card Companies offer gift coupons instead of reward points. You can even encash reward points.
If you keep using certain services frequently like air travel, shopping at malls and supermarkets, frequent use of hotels and so on, co-branded credit cards can certainly help you. Credit Card Companies launch co-branded cards in partnership with airlines, malls, retailers, supermarkets, petrol pumps, and hotels.
The reward points you get on co-branded cards are higher than most other cards. Reward points on co-branded credit cards can be 5-10 points higher than other cards. So, how do co-branded credit cards reward you? If you buy tickets of the airlines with which the credit card Company has a tie-up using the co-branded card, you get to enjoy reward points. If you swipe the co-branded credit card to pay the electricity bills, you will get less number of reward points compared to swiping the card at a hotel. This is because the credit card issuer earns higher interchange fees at the hotel vis-à-vis the power utility Company.
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Some credit card issuers offer cash backs on credit cards instead of reward points. Cash backs are great when you have limited money to spend. Some credit card issuers offer cash backs when you pay utility bills while some credit card issuers offer cash backs when you shop at retail stores, supermarkets, online stores and fine dining.
Getting cash backs is not easy. Many credit card issuers have lengthy terms and conditions which you need to satisfy. Credit card issuers would ask you to spend a minimum amount before you are eligible for cash backs. There could be a restriction on the number of transactions eligible for cash backs. You need to study the cash backs, credit cards offer, before opting for them.
Banks send a report on your loan repayments (This may be loans and credit cards) each month to credit bureaus like CIBIL. CIBIL creates your CIR (Credit Information Report) based on credit history (track record of borrowings and repayments) and assigns you a score, between 300 to 900. A credit score of 700+ is considered to be good and loans are easily sanctioned. If you borrow well within your credit limit and make timely repayments, your credit score goes up. This helps you negotiate better rates with lenders.
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