How to Use Credit Cards: via Liquid Funds

15 May 2016 | 1330 Views | By Mint2Save

Credit Card use

Credit cards have become synonymous with all the expenses for the Urban. From buying groceries to purchasing air tickets, credit card yourself for every service or product you want!! A lot of corporates do encourage this culture among their employees, often making a particular credit card brand available at no cost to them. Adding to this are the credit card companies, showering up with numerous offers, redeemable reward points and what not!! However, there has been a grave concern among us over spending beyond our limits via this smart plastic money. Moreover, with the advent of online shopping, the defaulters, the late fee payers and the amazing offers, the use and mismanagement of credit cards on a constant rise. The payment reminders are always on time and the penalties are chronographed, but can planning the credit bill payment be useful?

While researching our options to make credit usage viable and solving the card bill issue, we searched for an instrument that could balance out the expenses of the credit card. A perfect solution for credit card bill that not only acts like a piggy bank, but also reaps interest. It cannot be easily used for expenditure (like a savings bank account), but solely focus on comfortably paying out the credit card bill.

The answer is simple: Liquid Mutual Funds.

Really? But all we usually hear about mutual funds is they are subject to market risk and we have to read the scheme document properly before investing!! This fact is indeed true, however, the risk is dependant upon the type of underlying investments. Mutual funds are classified in the manner they make investments and the risk they pose. Check out our article on mutual fund riskometer, to know more about investment risks associated with mutual funds.

Well, money invested in the liquid funds is parked into money market instruments, treasury bills, commercial papers and those instruments where the chance of losing money is minimal. Yes, it tends to be in the least risky zone. Moreover, returns over an year are usually 9-9.5%, far better than even what bank fixed or recurring deposits offer.

How about redemption? Well, you can redeem the funds from your liquid fund within 24 hours. Requests can even be initiated online, at the comfort of your home. There are no exit loads (which are usually there when you redeem from equity based funds within a small amount of time), irrespective of the fact that how soon you redeem your funds.

So, how do you team up a liquid fund with your credit card spendings? Follow these simple steps:

Open MS Excel and enter your previous credit card bills, say past 6-8 months spendings.
Use “Avg” function to take average of those spendings.
There! You have arrived on the amount of funds you need to deploy in the liquid.
Searching for a liquid fund to invest is not a difficult task as the products in which they invest are all the same and the returns don’t share much deviation too. However, it is always good to keep in mind the past returns and plan our investments accordingly.

The amount saved via liquid funds might be very small, but it would grow a lot in those times when your spends are not high or you have to pay your once an year premiums for any insurance that you have availed.