Number One: You Can Actually Make Money Using a Credit Card

How Does That Even Work?

This is possible through a simple understanding of the principle of a credit card:

• In a way, the credit card company gives you an interest-free loan of 30 or 45 days. They say that you spend anything at the beginning of the month, you do not need to pay any money through the credit card. Then, at the end of the month, they generate a bill or a statement and give you approximately two weeks to pay it in full, i.e., 30 to 45 days. They will not charge you for that amount.
• The credit card company earns money from the merchant. Whenever you use your credit card, the merchant who accepts it, whether it be a retailer or anyone else, gives one to two rupees to the credit card company for the usage of that credit card.
• If you pay your entire monthly bill (100%) after 30 or 45 days, the credit card company will not earn anything from you.

So, what does that do? It basically gives you a window to make money from this.

Step-by-Step Guide:

1. Assume that you cover all your monthly expenses with your credit card. Everything, except for a few things like rent, EMI, etc., can be paid using your credit card. Your electricity bill, clothing bill, eating out bill, book bill, taxi bill, petrol bill, and more can all be paid using a credit card.
2. During that period, you invest that entire amount in a safe investment like stocks, etc. Ensure it goes into something where your returns are fixed, and the best option for that would be a fixed deposit (FD).
3. Put your entire salary, which is equivalent to your monthly expenses, in an FD for 30 to 45 days. Whatever interest you earn in those 30 to 45 days will be the extra income that you generate absolutely free of cost.
4. At the end of the month, liquidate that FD, pay off your credit card statement in full, and make money. This becomes even more exciting when done for a long time and for larger amounts.

Example:

If you want to buy a phone, you might see a no-cost EMI option. A credit card company might offer you 6 months no-interest EMI, meaning you can pay the total amount in six equal installments. If you have this credit card, you should take this option, but ensure that you already have the entire amount.

For example, if your total amount is ₹88,000 and you take an EMI for 6 months, your EMI comes to ₹14,667. If you invest this ₹88,000 in an FD with a 6.25% interest rate for 6 months, you will earn ₹750 absolutely free. This is one way to make money through credit cards if used smartly.

Important Points:

• Before making any purchase, you should already have the entire amount to avoid taking a loan.
• Always pay off the entire monthly bill in one go, never opt for the minimum amount due.

Reward Points:

Whenever you use a credit card, the merchant pays 1 to 2% to the credit card company. The credit card companies then give back a small amount of whatever money they earn in the form of reward points. These reward points can be used for:

• Airline tickets
• Cashback on e-commerce platforms
• Gift vouchers

Essentially, you make the same purchases you would make anyway, earn reward points, save money, and make money because of it.

Apps like Cred:

Cred is a very good app that gives you reward points for making your credit card payments through it. You can earn additional reward points, participate in games, win cashback, and get access to unique products and brands. Cred also helps manage multiple credit cards, track bills, and avoid unnecessary charges.

CIBIL Score:

Your CIBIL score is a measure of your creditworthiness. If you use a credit card and pay off your bill diligently every month, your credit rating will improve. A high CIBIL score can help you get loans at lower interest rates in the future. For example, a home loan interest rate can vary significantly based on your CIBIL score, saving you a considerable amount over the loan period.

Credit Card Offers:

Many credit cards offer cashback and other promotions, especially during festive seasons. Simply owning a credit card can provide these benefits, often offsetting any annual fees. By taking advantage of these offers, you can earn additional money.

Conclusion:

Using a credit card wisely can provide numerous financial benefits. By covering monthly expenses with a credit card, investing the equivalent amount in a fixed deposit, and taking advantage of reward points, no-cost EMI options, and credit card offers, you can make and save money. Maintaining a high CIBIL score by paying off your credit card bill in full each month also ensures favorable loan terms in the future. Using apps like Cred can further enhance these benefits.

In summary, a credit card, when used smartly, can be a powerful financial tool.