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OPTIMISE THAT CREDIT CARD
December 21, 2012 COMMENT comment
     
OPTIMISE THAT CREDIT CARD
By Niku Sidhu
 
 
Oscar Wilde had famously declared, “Anyone who lives within their means suffers from a lack of imagination!” Who knows, perhaps he may have been amongst the first few beneficiaries of a credit card? What came first, the egg or the chicken? Temptation or the habit of spending freely? One cannot say. What we can say is that credit cards, if used sensibly, can be a powerful tool for better financial planning in an era completely subsumed by consumerism.
 
For starters, banks offer basic versions of credit cards free of charge if the customer maintains a total relationship limit in a given quarter; or to its employees if a company maintains salary accounts with the bank as a corporate tie-up. With continuous use and good credit history, a bank may choose to up your credit limit or waive annual fees. As a pro-active customer you could negotiate with the bank.
 
Revisit your credit-card usage to check if you have the credit limit
you desire. If it is too low, you can approach your bank to make it higher for which you need to submit income documents. When applying for a fresh card, do not be attracted by the annual fee waiver or credit limit alone but the benefits that come with it. For example, a premium card with a higher limit and a golf access programme may be better suited to a golfer who can enjoy a game by paying for teeing off charges without paying membership fees.
 
Understanding the billing cycle is critical in order not to end up paying exorbitant interest charges on your credit overdue limit, some of which can add up to a whopping 44.6 per cent per annum. Give standing instructions to your bank to debit your account for total payment on due date. It would ensure discipline on your front too since you must have the sum in the account by the due date. If your statement period is from July 23 to August 22 and payment due date is September 12, using your card on August 23 pushes forward the due date to October 12; seven weeks use of funds without maintaining the signed amount in your account!
 
Two great features built into credit cards are emergency encashment and theft insurance. In the event that you lose your credit card in any part of the world, you can approach the nearest branch of your bank to get an emergency fund of up to US$ 2,000. Different global cards may have varying limits and tie-ups with other banks and it is a good practice to check both before you travel. The foreign branch verifies your details from the relationship manager in the home branch and issues a new credit card within two working days. Inform your bank if you anticipate travelling overseas to avoid the banks risk team red flagging and blocking any unusual transactions from your card.
 
In case of a stolen card fraudulently used, you will need to notify the bank within 24 hours of loss of card; the bank will cover the card usage to a maximum of credit limit in the preceding 24 hours only. Give your mobile phone number to the credit card division of your bank in order to get alerts each time your card is used. This will ensure you report a lost card in the shortest time possible.
 
The most alluring aspect of credit card use is the reward points system, which earns its holder a predetermined number of points against a sum of money used to purchase goods and services. Your card can be used for making utility payments such as electricity and phone bills; insurance premiums; spa visits; car service; fuel bills where merchant charges have been waived; discounted health packages; fitness packages; purchase of white goods and household appliances. Extra reward points are credited for purchases made in high-end luxury retail stores and premium hotels. Different schemes are launched tailored to suit the end user. If you are a frequent flier, a travel portal or airline co-branded card gives you additional airline miles. For a sales executive who spends a higher amount on fuel, an oil company card is more up her alley. The points keep adding up and can then be redeemed to receive freebies such as flight tickets, accommodation vouchers, and electronics. Also, high-ticket purchases of white goods can be converted to interest free EMIs, permitting you to pay in installments for the refrigerator, television or furniture you always desired.

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