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EARN EXTRA INCOME USING CREDIT CARDS
PLAN 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 expenses
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 .
DGM ( Retired )