Mr. Raj Khosla Explains All About Credit Cards at #MoneyWithMoneycontrol

Mr. Raj Khosla Explains All About Credit Cards at #MoneyWithMoneycontrol

It is really hard to imagine a World without Credit Cards today as you can buy from clothes to furniture, everything swiping a Credit Card. But is having a Credit Card in your wallet more pain than gain? Not everyone is an expert at managing their plastic spends.

Moneycontrol’s Sakshi Batra chats with Founder and Managing Director of MyMoneyMantra, Mr. Raj Khosla to decode the fine print of using Credit Cards. Here are the excerpts from the Expert Talk with MMM MD on Managing Money With Moneycontrol – All about Credit Cards.

1. Welcome, Mr. Khosla. You have always been educating your customers about the best ways of using Credit Cards. Kindly help our viewers understand the various types of cards available in the market & what are the varied kind of features that come packed with these cards?

Mr. Raj Khosla:

First of all, let me share a brief perspective for our viewers. India’s population is 130 crore & we have 5 crore cards enforced, compared to the United States, where the population is 33 crore and as much as 36 crore cards are enforced.

Adds Sakshi Batra: So our usage is meager in comparison!

Mr. Khosla continues: Credit Cards are going to become an increasingly dominant part of our decision making. Remember more & more plastic cards are going to come in life & that is a good sign.

2. How many cards should a user own & which cards should one pick?

Mr. Raj Khosla:

Well, before picking a card, one should answer what’s their entitlement. We all have limited income & spending capability. It is important to figure out, given your income, what are the types of card that you are likely to get.

After determining the available options, you must define the spend type or your spending needs. If it a Lifestyle Card, it will come packed with features such as concierge, Hotel Airport transfer, Lemo pick up, golf play, etc. Before you hold this card, you must ask yourself- are you going to use all of these features? If no, then certainly, you should not opt for this category.

For a frequent traveller, Miles feature is a fantastic choice. With your Miles Card, you accumulate reward points at an accelerated rate on travelling abroad.

Likewise, if you shop a lot, go for a Shopper’s Stop Card or Spencer’s Card and get rewarded for spending in the stores.

For those who do not use any of these features and need card only for Fuel refilling, IOC Card is a great choice. It is the simplest & cheapest form of Credit Card & lets you accumulate points on fuel.

3. Mr. Khosla, how many cards do you own & how do they work for you.

Mr. Raj Khosla:

I own four cards. But, would suggest our viewers to have at least two cards with different payment dates. It helps you to plan your spends in an organised manner. For instance, if one of your cards has a billing date on 15th of the month, and the other card’s billing date is on 30th of the month, you can swipe your later card for the purchase and enjoy a larger credit period at zero cost. All you have to do is swipe the card with farther billing date.

Different banks run different schemes. For example, one card may reward you on eating out, another may offer deals on MakeMyTrip, cheap tickets booking, etc. Having 2-3 cards is thus a good idea.

Sticking with one bank card is perhaps not the best decision.

4. Some people apply for Credit Cards for all these benefits & rewards and aim to enjoy freebies. Do you recommend getting a card for freebies?

Mr. Raj Khosla: Everyone likes freebies. But caution is required with Credit Cards.

You should only spend when you need to spend. Never spend to accumulate points for a major purchase at discount. A majority of cards have a time limit, and they expire after a point. An exception is Citibank Credit Card where you can carry forward rewards till infinity.

5. What are do’s & dont’s of using credit cards?

Mr. Raj Khosla:

Credit Card outstanding can be one of the most expensive loans that you will ever want to take in your life, i.e., 36%-42% pa.

Credit Cards entail a facility & add convenience to your life. While using you must understand that you pay the balance on time. Failing to meet the obligation may end up shouldering a huge amount of interest.

If it is only 1 month delay you can pause and clear of next month. For one month at 3 % interest is still bearable. However, if you think you need 1 year to repay the balance, you must shift to a better priced facility such as Personal Loan, which is available at a much lower rate.

6. Would you agree that Credit Card has shifted traditionally prudent Indian towards a debt trap?

Mr. Raj Khosla:

It is not fair to shoot the messenger. If you are a compulsive spender, then it is nothing to do with your card. You need to regulate the spending patterns. Always spend as much as you feel you can repay comfortably.

Never share your card details over the phone. Chances of taking you for a ride are high in case you share card details with someone on the phone.

7. Mr. Khosla, how would you guide on deciphering the fineprints of credit cards, especially pricing?

Mr. Khosla:

Know what you are getting into. You should always bargain for what you need. Enquire about:

  • Joining Fee
  • Annual Fee
  • Is there any fee which is waived off based on spends? It is an excellent feature to have.
  • Foreign exchange mark up: All of you travel overseas and spend using your credit card for overseas expenditure. Each bank has a different mark-up when you spend in foreign exchange overseas, ranging from 1.75 to 3.75%. You can save if your card has a lower mark up. Currently, Yes Bank offers the lowest 1.75% mark up.
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