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HAVE CAKE AND EAT IT TOOÂ
                        EARN  BANK INTEREST ON  SALARY                                                              WHILE SPENDING ALL YOUR SALARY EARN EXTRA INCOME USING CREDIT CARDSPLAN BANK ACCOUNTS, EXPENSES , CREDIT CARD USE TO EARN EXTRA INCOME ARTICLE ORIGINALLY CREATED IN JANUARY 2015 : ​The article explains how you  can earn on your salary account while spending  most of your salary . If your savings bank account is getting you nominal interest  , we show you how to increase it many folds  without cutting on your expenses. You spend all your expenses as usual and still earn interest .  Eat  cake and have it too . Are you spending all your  salary and you are getting nominal interest on your savings bank account ?  While we encourage you to reduce expenses , we  are showing a way with  4 simple steps  by  which  you will earn  higher interest almost equivalent to  bank deposit rate  even when you continuing to spend as usual  most of your salary .  Initially the idea may look crazy  to  have fixed deposit and overdraft against the same on same day . As you see  in the case study , you will have amazing results . 1. Open  a Fixed  Deposit for  amount of salary you get in to account on the day of salary itself . So all your  month's salary goes to Fixed deposit . Presently you can earn  8.5% to  9% pa  on 1 year deposit What I will eat during the month and how I live  without  salary ? 2.  Avail overdraft  facility  against the Fixed Deposit just opened to the maximum extent .   You can avail around 90% of  Deposit amount as limit of overdraft facility . Overdraft facilities normally carry  an interest of 1% to 2 %  more than F fixed Deposit interest rates . Utilise the facility for  your expenses 3. Avail  credit  card facility from the same  bank where you are drawing salary. Obtain credit  limit equivalent  just to one month's salary . Normally banks do not charge either  joining fees or  annual fees  for their own customers . So you get free of cost . Otherwise there are various banks which issue credit cards free of cost . 4. Have your standing instructions  registered with the bank to deduct 100  % of your card dues on due date itself  from your overdraft  account . You will have no head ache of delayed payment and penalties for delayed payment . You will  start  earning interest on  deposit from the very first day . Now postpone  your expenses  as much as feasible  without attracting penalties / charges for delayed payments .Some simple ways to  delay your payments are 1. Reduce  cash holding to the minimum required 2.  Postpone your payments to near due dates . 3. Utilise your credit card to the maximum extent  at the beginning of billing cycle .Normally credit cards give free credit period ranging from 20 days to 50 days . If you use cards at the beginning of the cycle , you will get 50 days of free credit period .  By adjusting payment days suitably , you can get  get maximum number days of free credit . Now , you have not reduced  any of your expenses nor you have not paid any charge for availing the above banking facilities . See how much  your interest income has gone up .  I will show an example here  of Mr Santhosh .You can calculate  how much you can gain  in your salary and expenses circumstances .  Click Here and  go to Personal Finance Page  for Tips on Managing expensesÂ
Case of Mr Santhosh , an young marketing executive in Bangalore
Mr Santhosh  is earning  a monthly salary of Rs 50,000/-. He  has come new to Bangalore and he wants to live full  and he spends most of his salary  .  His expenses amount to Rrs 45,000/-  pm and are spread evenly over the month . He is able to save  just Rs 5,000/- at the end of month . He has got savings bank account with ABC Bank  which pays SB interest of 4 % pa , Fixed deposit interest of 9%  pa  and  charges overdraft  interest of 11%pa,. They issue free credit card facility  to their savings bank account holders whose salary is routed through the bank  . Interest on SB  balance of Rs 5,000/-  =  17.00 pm when Mr Santhosh maintains  his savings bank account alone . Now he has accepted our suggestion  and opened  a Fixed deposit , availed overdraft against the deposit ,  obtained  a credit card  and has given standing instruction to recover 100%  of dues on due date .  Interest  on Fixed deposit  of Rs 50,000/- at 9% pa  =  Rs 375/-  pm .  Interest on overdraft  at 11%                      = Rs 207/-  pm ( on an average  overdraft balance of Rs 22,500/ - assuming  he has  not used his credit card at all) If Mr Santhosh uses his credit card to an extent of Rs10,000/-  and thus postpones his  payment by more than one month .his net payment would be Rs 35,000/- and average overdraft balance would comedown  to Rs 17,500/- . and interest on  overdraft for the  first month            = Rs 160/pm Net interest income of Mr Santhosh  Rs375/-  -  Rs 160/-  =  Rs 215/- . Thus in the very first month Mr Santhosh could his  interest receipt from  Rs 17/- to Rs 215/-  which is more than 12 times higher . Now let us see what happens to Mr Santhosh ' s interest income in second month . Month end balance in overdraft account is  Rs 35,000/- on getting salary of Rs 50,000/ , his overdraft  has  a credit balance of rs 15,000/- Now Mr santhosh continues to spend Rs 45,000/-  this month also out which Rs 10,000/- is spent through credit card . Now Mr Santhosh's  Fixed Deposit interest for the month       =   Rs 375/-  His overdraft interest  on average  balance of Rs 10,000/-        =  Rs  92/- Mr Santhosh's interest income  for second month is              = Rs 263/- Thus  overdraft interest would go on reducing  and net interest income would go on raising  month after month until overdraft interest reaches zero and  Santhosh  would earn 100 % of fixed deposit interest . Thus Mr Santhosh will earn fixed deposit interest of Rs 4,500/- in the year  while his overdraft interest may not exceed  Rs 500/- . If he continues to judiciously use his credit card and payments , his net interest income would be Rs 4,000/- . Without reducing his expenses even by  a rupee, Mr Santhosh  has earned. By using his credit card more and more , he would be saving more and more . You too can  earn  . TRY  Check up with your bankers  and confirm charges  they levy . Work out  gains based on your salary , your expenses , spending pattern  .Bankers will be happy  to assist you as they will have  fresh deposit , overdraft and credit card account  from you . All the best in your endeavor to save more . ​
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Manjunathan BellurÂDGM ( Retired ) |