How to use Credit Cards Smartly?

In my previous post on Credit Cards Credit Card – SAVE while you SPEND , i highlighted, how a judicious credit card spending help in substantial saving over a period of time. In this post i will discuss, how we can increase our savings by juggling between 2 credit cards. Yeh Dil Maange More !!!

I am using the HDFC bank credit card from last 8 years & not using any other credit card as of now. Based on my research, i found that i can afford 1 more credit card without impacting my CIBIL score. 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.

Recession forced me to go ahead with Cash Back Card of Standard Chartered Bank (Please note Credit Cards of small players like Standard Chartered Bank, Kotak, ABN Amro etc comes with more benefits compared to big players like ICICI & HDFC). I will discuss more about selection of credit card and advantages of cash back credit cards in my future post.

Billing date of my current HDFC Credit Card is 15th of Month (Payment date is 5th of next month) and billing date of Standard Chartered Credit Card (SCB) was 25th (Payment date was 15th of next month). After few billing cycles i requested SCB to change my billing date to 30th (Payment date changed to 20th of next month) and they obliged happily. Point to note is that big players like HDFC and ICICI are very rigid in their approach. In past, i requested HDFC to change my billing date multiple times but despite being super premium customer they refused. They told me that billing date once fixed cannot be changed. Similar is the case with ICICI bank (I used ICICI credit card few years back and closed it due to inconvenient billing date). Small players are very flexible in their approach, which i realized late.

For my own benefit, i decided to divided my business between 2 credit cards to get maximum benefit & to save maximum during recession. All my purchases between 16th and 30th of the month are through HDFC i.e. i use HDFC credit card for 15 days from the billing date of HDFC (15th of Month) & all the purchases from 1st of month to 15th of month are through SCB credit card i.e. 15 days from the billing date of SCB 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 i am going to gain out of it and answer is very simple that by doing this i am getting an xtra 15 days credit for all my purchases every month. In these tough times of recession and high interest rate 15 days xtra credit means lot of saving.

Lets take 2 examples to understand better

Example 1:

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

Scenario B: Now if pay for this transaction by SCB credit card then my Billing date is 30th of same month and i need to pay for this transaction by 20th of next month. In this scenario i 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. Xtra credit period of 15 days, simply by juggling between 2 cards

Example 2:

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

Scenario B: Now if pay for this transaction by HDFC credit card then my Billing date is 15th of next month and i need to pay for this transaction by 5th of next to next month. In this scenario i 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. Xtra 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 & xtra 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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