Republic day sales are in full swing in the online sphere. Redmi Note 5 pro is a decent phone priced originally at Rs.17,999/- on both Amazon and Flipkart. As a part of the sale, both of them are selling it at Rs.12,999/-. Flipkart is giving an extra 10% discount on using SBI Credit cards - which means that it is available to me at Rs.11,699/-. They also have NO COST EMI option on SBI Credit cards, which means that I have to pay no interest as long I repay the cost of the device within 6 months.
Long story short, I bought the phone in 6 months NO COST EMI for Rs.11,699/-. I pay my first installment of Rs.1950/- on 7th March 2019. The phone will be delivered to me on 23rd January 2019.
I have to pay Rs.1300 less. And I will have used the phone for 43 days before I pay the first rupee for it. All because I used my Credit card. Now that I have your attention, let's proceed.
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Let us get the first order of business out of the way. What qualifies me to have a say on the said subject? I have been using a credit card for over 8.5 years now. I don't remember who told me to get a credit card and use it the way I do, but I would praise that person to the high heavens. I've been equipped with a tool of multiple benefits, with the knowledge of how to use it without getting my fingers cut off. I thought I was being selfish in not sharing this information, and so here we are.
Oh!! One more thing. I'm a four year old banker now. So I guess it weighs in my favour to speak on this subject too.
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There are some terms you have to know before we start though. I thought of giving a dictionary style explanation, but I believe an actual situation would be able to help you understand better.
Suppose that I have a credit card of Rs.50,000/- limit. It means that the total amount I can borrow is Rupees Fifty Thousand.
Suppose the card's billing date is 17th of every month. Any purchase I make will reflect on the bill made on the coming 17th.
The payment date is usually 20 days after the billing date, which in this case is 7th of the subsequent month.
Let's try some examples now, shall we??
Date - 17th January 2019
a. Rs.1,000/- spent to buy petrol.
b. Rs.12,000/- spent online to buy a phone. It is on NO COST EMI. I have to pay Rs.2,000/- for six months.
Date - 18th January 2019
c. Rs.1,000/- spent to buy petrol. (again!!)
Let us assume that "a", "b" and "c" are all the purchases I made in that period. Let us see how my credit card bills look like now. I get a bill for all pending purchases on 17th of every month. The bill is generated at midnight, so it includes all the purchases made on 17th too.
My bill generated on 17th January 2019 will include the transaction "a" and "b". Since "b" is an EMI option, I will be charged only Rs.2,000/- for it. This means that the bill amount is Rs.3,000/-. I would have to pay this amount on the coming 7th, that is, on 7th February 2019.
My bill generated on 17th February 2019 will include the transactions "b" and "c". Again, since "b" is an EMI option, only Rs.2,000/- will be charged. Again, my bill amount is Rs.3,000/-. And my payment date is 7th March 2019.
My bill generated on 17th March 2019
will include the transaction "b" only. Again, since "b" is an EMI
option, only Rs.2,000/- will be charged. Again, my bill amount is
Rs.2,000/-. And my payment date is 7th April 2019.
If have looked closely, you would see that I paid for the petrol purchased on 17th January 2019 on 7th February 2019, and for the petrol purchased on 18th January 2019 on 7th March 2019. That my friends is the power of the billing cycle.
A note on the credit limit though. The variation of credit limit is as follows:
On 16th January,
Rs.50,000/-.
On 17th January,
after "a" - Rs.49,000/-.
after "b" - Rs.37,000/-. (even though it is on EMI option, the entire amount is reduced from limit)On 18th January,
after "c" - Rs.36,000/-.
On 7th February,
on making payment of Rs.3,000/- - Rs.39,000/-
On 7th March,
on making payment of Rs.3,000/- - Rs.42,000/-
On 7th April,
on making payment of Rs.3,000/- - Rs.44,000/-
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In the hope that the above helped you understand the concept of credit limit, billing cycle and payment date, I will take a break for now. Please don't start applying for a credit card just yet. We have only gone through the positives of credit card. Going back to the tool analogy I used before, I have only told how to use a hammer to drive nails in the wall easily. I'm yet to tell you how not to hit your own fingers with it.
You need to look at the Annual Charges, processing fees involved, reward points scheme, and in what manner you can redeem those points before you do that. And I'll help you to understand those points of concern in the next part. The next part which I will post from my new phone. ;)
