Use Credit Cards Smartly!

A judicious credit card spending help in substantial saving over a period of time. In this post we will discuss, how we can increase our savings by juggling between 2 credit cards.

Please note that if you have more than 2-3 credit cards then it shows credit Hungary Behavior which can impact your CIBIL credit score adversely so it is advisable to carry only 2 or max 3 credit cards.

Billing date of a person's 1st Credit Card is 15th of Month (Payment date is 5th of next month) and billing date of 2nd Card  was 25th (Payment date was 15th of next month). After few billing cycles he requested second bank to change my billing date to 30th (Payment date changed to 20th of next month) and they obliged happily.  In past, he requested 1st bank to change his billing date multiple times but despite being super premium customer they refused. They told him that billing date once fixed cannot be changed. Small players are very flexible in their approach, which he realized late.

For his own benefit, he decided to divided my business between 2 credit cards to get maximum benefit & to save maximum during recession. All his purchases between 16th and 30th of the month are through 1st bank i.e. he use 1st credit card for 15 days from the billing date of 1st bank (15th of Month) & all the purchases from 1st of month to 15th of month are through 2nd credit card i.e. 15 days from the billing date of 2nd Credit Card (30th of Previous Month). In short, use the credit card only for 1st 15 days from the billing date and ensure that billing date of 2 credit cards are approx 15 days apart. 

Now you must be wondering, how he is going to gain out of it and answer is very simple that by doing this he is getting an extra 15 days credit for all my purchases every month. In these tough times of recession and high interest rate 15 days extra credit means lot of savings.

Lets take 2 examples to understand better

Example 1:

Scenario A:  Assume he made a purchase on 5th of the month and he have only 1st credit card. For this purchase his billing date is 15th of same month and he need to pay for this transaction by 5th of next month. In short he will get credit for 30 days on this transaction.

Scenario B: Now if pay for this transaction by 2nd credit card then his Billing date is 30th of same month and he need to pay for this transaction by 20th of next month. In this scenario he will get credit for 45 days.

Therefore, in Scenario A credit period is 30 days and in Scenario B credit period is 45 days i.e. extra credit period of 15 days, simply by juggling between 2 cards

Example 2:

Scenario A:  Assume he made a purchase on 25th of month and he have only 2nd credit card. For this purchase his billing date is 30th of same month and he need to pay for this transaction by 20th of next month. In short, he got credit for 25 days on this transaction.

Scenario B: Now if pay for this transaction by 1st credit card then his Billing date is 15th of next month and he need to pay for this transaction by 5th of next to next month. In this scenario he got credit for 40 days.

Therefore in Scenario A credit period is 25 days and in Scenario B credit period is 40 days i.e. extra credit period of 15 days, again simply by juggling between 2 cards.

From Example 1 and Example 2, it is clear that if we have 2 credit cards with billing dates 15 days apart then we can simply time the swiping of each credit card to get maximum credit period for each transaction. If we assume revolving credit of 50k every month for 15 days & extra credit of 15 days on this amount then annually you can save Rs 2250 assuming 9% interest on bank FD.

Credit cards, if used judiciously can help to save a lot but only word of caution is that credit card should be used only for necessary purchases not for impulse buying else it can land us in deep mess of debts.

Disclaimer: All the examples used in above post are for illustration purpose and to simplify the subject.
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Source: Secondary