Yet one different is Ankush Dixit, 33. Over time, he has snagged 15 enterprise class flight tickets between Delhi and Dublin (Ireland) for his journeys with family almost totally with out spending a dime. “The flight tickets would have worth me spherical ₹25 lakh,” said the Gurgaon-based entrepreneur.
Dixit and Ansari are not alone. There is a growing group of individuals, who sign up for several credit cards to amass enough reward points that would fund a major chunk of their travel budgets, including flights and hotel stays. Cashbacks and vouchers for buying gadgets, shopping on e-commerce sites, watching movies and dining out are some of the other perks that credit cards users can enjoy. These self-proclaimed credit card enthusiasts do one simple thing to achieve this–funding all their expenses through credit cards.
“I use credit cards for all my regular expenses, from rent, groceries, to shopping and dining out, and each transaction earns me rewards. Even for small expenses, like rickshaws or paying vegetable vendors, I use credit cards,” said Ansari, a finance professor at OP Jindal University. “It’s a fantasy that it is worthwhile to spend extra to earn rewards on enjoying playing cards. Your day-to-day payments will do the job.”
If you run a business, you could have sweeter deals, because along with your personal expenses, you can also fund business expenses using the plastic.
Take the case of Murshidabad-based entrepreneur Sumanta Mandal, whose monthly spending through credit cards average ₹2 lakh. “My personal expenses are limited, but as a business owner, I use many business credit cards to cover my expenses, such as vendor payment, advertising costs, software subscription and hosting cost,” he added.
However, the rewards components sport should not be as simple as it sounds thus far.
The CC geeks
Wringing out most benefits out of 1’s spending depends on various issues. For one, spending functionality would possibly play a key perform throughout the type of perks you possibly can presumably earn. Dixit’s 15 free enterprise class flight tickets worth ₹25 lakh received right here for over 10 lakh air-miles (equal to about 16 lakh reward components). It acquired accrued by spending about ₹80 lakh. “In the ultimate one yr, I put two major payments: my wedding ceremony ceremony and residential renovation. However, that’s an exception. On a imply, my annual spends on financial institution playing cards are ₹30-40 lakh,” he added. Dixit paid ₹3.5 lakh in taxes on these tickets out of his pocket.
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Boopathy Arumugam, a businessman from Erode, Tamil Nadu, who has annual payments of over ₹1 crore, takes advantage of his extreme spending vitality by charging all his payments via financial institution playing cards to earn adequate reward components to fund his worldwide family holidays yearly. “For my journey to Greece and Austria, I booked enterprise class tickets for my family and lodge stays using my financial institution card components,” said Arumugam, 47. All the free perks combined were worth ₹14.75 lakh. “I spent 480,000 miles for four business class air tickets, and for hotels, I spent 190,000 points.”
A majority of these financial institution card nerds have annual spends of over ₹8 lakh. But even those who do not spend as lots, have only a few strategies up their sleeves to fund luxurious holidays using rewards. Gurgaon-based Ankush Sethia is a dwelling proof. He makes use of Axis Magnus card that gives additional 25,000 components worth ₹5,000 on spending ₹1 lakh per thirty days. If he cannot spend ₹1 lakh for his frequent payments, Sethia buys vouchers and sells them to buddies at a discount to complete the milestone.
During product sales on e-commerce platforms, he retailers for his family and buddies on e-commerce platforms using reductions obtainable on his card. It’s a win-win for every because the shoppers get a discount, and Sethia earns rewards on the purchases with out really spending his private money.
The rewards depend on the type of funds on financial institution playing cards. For event, some cashback enjoying playing cards exclude widespread payments akin to utilities and groceries from its benefits, and might be not useful to any person if these are key spending areas. However, there are workarounds like looking for an Amazon Pay voucher or topping up the Paytm pockets to pay for these items. This method would possibly enchantment to costs of 0.5-2%, however when your card supplies you a 5% cashback, you may nonetheless pocket a sweet 4.5-3%.
Note, that no two financial institution playing cards would offer the an identical price, and rewards programmes on a number of kinds of enjoying playing cards are difficult. For event, reward enjoying playing cards that allow transferring rewards to airmiles or lodge loyalty programmes would require you to guage the conversion costs on two ranges: One, reward earned on each purchase and two, conversion ratio of rewards to loyalty components.
Sounds difficult? Well it presumably for a beginner. But the components nerds have mastered the paintings. In actuality, some have turned the keenness for financial institution playing cards into their occupation. Dixit and Setia are co-founders of a financial institution card comparability platform referred to as Multiply, whereas Mandal runs a portal for financial institution card solutions and personal finance suggestion referred to as TechnoFino.
They contemplate in optimising spends to the hilt, which means that every one of them private on the very least 10 financial institution playing cards (see graphic). For event, Ansari makes use of Axis Airtel Credit Card merely to pay his and family’s phone funds. “All of us use an Airtel sim card and the one objective of this card is to recharge cell. Each recharge with this card supplies me 25% cashback.”
Mandal has 51 active credit cards. “I strategically choose cards based on my needs and preferences. For instance, when I plan to purchase gadgets, I use a credit card that offers reward points redeemable for vouchers at Croma or any other electronic stores. Simultaneously, I am also accumulating air miles for future travels within the next five years,” he added.
The 20% TCS on worldwide transactions accomplished with a financial institution card should not be a deterrent for these CC geeks as banks present 2X rewards on spends accomplished overseas. Dixit has already exhausted his ₹7 lakh prohibit, previous which TCS will kick in after 1 July nevertheless he is prepared for it. “To get 30% reward that my card offers, I’m high-quality with sustaining the extra 20% extra cash transfer. Also, if not credit score rating, I’ll use a debit card, which too attracts TCS so larger to utilize the financial institution playing cards which on the very least earns rewards,” he added.
Mandal concurred. “As the ₹7 lakh limit is not applicable to forex cards and cash, credit cards are a better option.”
Is it for everyone
Most rewarding enjoying playing cards are premium merchandise and comprise extreme annual prices ranging from ₹10,000-1 lakh (see graphic). Chasing rewards moreover runs the hazard of overspending. A 2021 look at by Massachusetts Institute of Technology said financial institution playing cards encourage spending by exploiting reward networks. People Mint spoke with, said they don’t make extra purchases merely to snag rewards. Besides financial institution playing cards carry the perfect charges of curiosity if one defaults on bill funds by the due date. Hence, the rule of thumb is to guage your cash flows sooner than spending on financial institution playing cards, and settle all dues in full and on time. Besides, award tickets (flight tickets bought by airmiles) are restricted, so one should e ebook them prematurely. Ansari intends to finalise all bookings for his world tour by June. “Earning rewards should not be the strong half, the strong half is guaranteeing that you just simply get an excellent deal on dates you’re obtainable. I’ll assemble my itinerary, look at all the provides after which start transferring the rewards, as as quickly as transferred, I may be sure to those airways,” he said.
Paying on time is even more crucial when you own multiple cards. Arumugam has missed due dates a few times when he was travelling overseas, but he was lucky as the banks waived off the fees in view of his timely payments history. Ansari has also missed a payment. “The bill amount was small so the interest did not pinch me, but my cibil came down from 790 to 750. It is not a massive downgrade as I have a long history of on-time payments. Even one default can bring down cibil scores by 80-90 points,” Ansari said.
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