My wardrobe is sponsored by my credit cards but then I don’t use my credit cards where I should not be using and so let me share with you where I avoid using my credit cards and you should also do the same.
1. Avoid cash withdrawals from ATM
Withdrawing cash from ATM using a credit card could be your biggest financial mistake. It has a very high rate of interest of around 3% per month. On top of that there is no grace period for the money withdrawn from the ATM which means you are being charged interest from the day you withdraw the money.
To avoid such instant cash interest rate, there are some retail outlets where you can pay using a credit card and get back the cash deducting 2% as service charge. This is not at all any different than withdrawing from ATM because you are anyway paying 2% for using the money. Yes it is slightly cheaper in the sense that you are paying 2% for using the money for 30 to 50 days depending on your billing date. I have never used such methods and try to avoid to the extent possible.
The process that I follow to avoid such withdrawals is very simple process of destroying my ATM Pin for my credit cards. I never even open the credit card pin mailers that comes along with my credit cards and though this has helped me a lot over the last decade to avoid using credit cards at ATM, it has becomes mandatory to be using your credit card pins in shopping malls and restaurants and so I am not able to use my credit cards anymore.
I have been getting new chip cards with new ATM pins but still I follow the same process of not using my credit card pins. I just don’t want to be visiting an ATM to change my credit card pins to keep them inline with my other pins and if I am not able to use my cards on some shops, I am fine that way. Yes it is becoming hard for me to be able to use my credit cards but I am not able to get into the right mind frame of using my ATM Pin in public either. As I am not confident of using my pins, I avoid using my credit cards.
2. Avoid multiple cards if you cannot remember billing and due date of each of your card
Billing date and due date are two different things. Billing date is when your credit card bill is generated and due date is the date when you need to pay the bill generated. If you spend just after your bill is generated, you can get the maximum time making the payment.
If you have more than one card, it becomes mandatory to be knowing the billing dates of each of your cards because the aim is to pay the amount by the due date but if you can borrow the money for free from credit card for the most amount of time the better and for that you may need to remember the billing date of your cards and use the one that is having the billing date farthest.
3. Avoid paying with a credit card if you cannot pay full amount within the due date
The best way to be managing so many credit cards is to automate the payment process and so all my credit card payments are automated to be paid in full by ECS and if you cannot pay your complete credit card expense by the due date, you should not be using your credit cards.
4. Avoid overspending with your credit cards
If you are not able to control your expense when paying through a credit card, you should not only avoid using a credit but also avoid carrying a credit card when going for a shopping. If your wife overspends on your card, you can just use the same technique of leaving your card at home instead of carrying along when going shopping.
5. Avoid foreign currency transaction
Foreign currency payments can be made only with a credit card and not with debit cards and they carry a transactions fee of anyways between 3 to 4%. If you have alternatives payment options, try avoiding a credit card payment in foreign currency.
I have been paying in USD for my domains, servers and hosting but if I have an option of making a payment through Netbanking I always prefer using that. I use GoDaddy for my domains because GoDaddy now accepts payment in Indian currency which is not the case with other domain registrar.
If you are traveling abroad, using your credit or debit card for ATM withdrawals can levy extra charges per ATM withdrawals. Try carrying a forex cards for such withdrawals instead of using your credit or debit card.
6. Avoid using credit card for accumulating reward points only
I have been using my HDFC Bank credit cards for very long time and have accumulated almost 17k points in the card but then recently I have purchased an office space and so I am not very ready on cash but the payment date for my HDFC Bank is 3rd of every month and that makes it more difficult for me to pay because some of my invoices and payments are cleared and received in bank after 5th of every month. So I have been avoiding my HDFC Bank card for couple of years now and prefer using Citi Bank card because the payment date for Citi Bank is 12th of every month.
Just to accumulate credit card points, I don’t use my cards and have an alternate card which provides cash back and not reward points as well.
7. Avoid exceeding credit limit
If you exceed your credit limit, you may need to be paying a lot of fees and so if your credit limit is too low, try spending within those limits and increase the limit with your usage instead of going beyond your limit. If you want to be making a big purchase in your credit card that does not have the limit, try making some advance payment before making the purchase and that will help save from charges for exceeding credit limits.
Now you know when and where you should not be using your credit card but do you know someone who may not be using the credit card efficiently? Share this article with him and help me spread the word and help him use the credit card in a better way.