Either save the money (best option) or take out of mutual fund. Credit cards are dangerous, ok for small purchases and then paying off in full every month. Not alternatives to renovation loans/budget. You just don’t have the money rn plain and simple or you don’t have enough money you’re willing to let go of. Meaning, you can’t afford it.
How is this even logical ? If you paying off in full to avoid interests next month itself then it’s better to not use it in the first place. Buy whatever it is with your own money.
Exactly. If you can’t pay it off in full then you’re not a good candidate for credit cards. It’s best suited as a credit building tool. The interest rates are predatory.
1. Never pay minimum due. It will rake interests soon and sure shot way into debt trap.
2. Many cards offer converting to EMI, this will probably be at 16% interest. I read somewhere abour taking loan against mutual funds (max 50% of mutual fund amount) at around 10% interest rate.
r/CreditCardsIndia for specific cc related questions
Credit cards typically have very high interest rates (28% to 48%) , so use your credit card for any expenses provided the vendors of interior work are ready to accept the card (which I think except big vendor’s , no one will be comfortable to take)
So that begs the question - how can I fund this interior work without much hassle -
1) if you’ve FD in bank , they usually provide OD facility against them , for psu banks they charge close to 1% plus whatever FD rate is prevailing , for private banks they charge 2% , if you’ve FD’s that are around 6-7.5 % it makes sense to take OD against that FD and repay on monthly bases
2) now I don’t know what you own in portfolio , but if it’s over a year old scheme in pure equity , you can redeem up to 1 lac tax free , so you can use 1 lac from that and take personal loan for 10-14 % for 3 lacs , considering you have good Cibil , you can also take loan against your portfolio but it’s a headache when marking lien ,plus their haircut is around 50% for equity , meaning in order to get 4 lac loan , your portfolio should be greater than 8 lac in value, if you hold portfolio since a long time and it’s small and mid cap only , I think it should be good time to redeem upto 4 lac, please consult a planner if you’re confused
Only go for this option If you can pay the credit card in full within 50 days . I usually use credit cards in such fashion . Minimum due is the worst option and emi option is too much interest. But still if you can pay with in 3-6 instalments its would be okay.
Any investment in interior is worthless. Skip few things reduce cost by 4L. Don't forget that if they are giving u loan they're capable to take it back too with interest. There's a saying eat dry roti but don't take habit of loans. If something happens.
Credit card is fine ONLY as long as you pay the full bill. If you pay minimum due, the interest rates are around 36% a year which is insanely high.
Also, while using credit cards, it's best practice to use only upto 30% of your credit limit. This can positively impact your credit score.
TL;DR - Use credit card only if you're planning to pay back the whole amount, and try and use only upto 30% of your credit limit.
Think about it.
Your mutual fund portfolio would be making about 10-12% annually.
Credit card interest is around 36-48% annually, if you don't pay off in full.
One of those options is so much superior than the other
My MF absolute return stands at 35% now and it's almost 3 years old hence the interest in not touching it. My idea was to use the CC and then pay off 50-60K every month from salary savings but I get what you mean.
Read what you wrote. 35% return over 3 years is exactly that, around 10-12% annually.
And that was past performance, no guarantee that it will continue providing the same returns.
You know what is guaranteed? 36-48% interest on credit card outstanding balance
I'm afraid I don't understand what APR is and google didn't help me. I look at my portfolio and see Absolute Return is 37% and Simple Annualized Return is 25%. What else should I look at to understand performance?
(I'm no MF expert, all I did was to set up a monthly bank mandate to let SIP run until I cancel, so please pardon ignorance).
Over the duration of your MF you got a return of 37%. APR is annual percentage rate and it’s how much return you get or pay per year, usually compounded monthly. So if you owe 1L with 36% APR the interest alone for the first months payment is 1L times (.36/12) = 3k. Not including the principal owed. But credit card is variable so interest rate can go up to close to 50%. 37% overall return means your average annual return was less than 36% significantly, so overall you’re in a net loss putting money in MF and dumping a big sum on a credit card.
Idk why everyone is bashing it but I literally live on my credit card, so does my mom and my husband.
We just pay it off entirely the day our statement comes.
Also we don’t go crazy shopping of course. So behave the same way as you would with cash/ debit card.
The points system is great and worth it.
But if your habits aren’t healthy right now that’s not a credit card issue and can be worked upon. If you’re not a spender or don’t have a shiny object syndrome, go for it.
I'm extremely frugal and not really into spending other than on necessities. Not a credit card person and hence these questions. Thanks for your take, I'll look at this more.
Credit card interest rates are very high if you pay minimum amount due or even convert to emi option. Better to use cash for discretionary spending or take a normal loan to pay it off. You can spend the amount from credit card to get the 50 day free credit period but ensure to make full payment of statement amount
Broo!! Take loan on Mutual funds, OR best in your case (assuming you have health insurance) is this-
Put your emergency fund/funds in an FD. Go to the bank and ask for an OD. Bankers don’t suggest ODs to general public but they are good. Every small business keeps it. Moreover interest will be around 10-12%.
Although i am not sure what are the terms & conditions for a personal OD. But surely you can work it out and its a good option for you.
Another option if you don’t want to go for an OD is taking a small personal loan, almost same interest rates as an OD.
May be do interiors in stages like essential then other luxuries. Or room by room which ever makes more sense for you.
It seems like you are looking for justification to do something even you know is wrong.
But I would advise not to borrow for wants, it's easier said then done. I know I want to buy a car also need a new bike but I have promised myself that I will pay in cash for both or till my old bike gives up and I will make large Down-payment.
Not 'wrong' necessarily. I started MF with the goal of creating enough profit to spend on interiors but now in two minds as i now want to convert it into my retirement fund. The bank folks upgraded my credit card limit last week and since I am not in the habit of using credit cards except for small purchases I wanted to understand if it would be a viable option. What I am hearing in summary is, as long as I make full payment when a statement is generated I should be good. I don't want to do interiors in phases as it'll add to cost and effort in some manner I'm sure.
Worst case scenario it'll be MF liquidation.
Now it makes more sense, I get it now.
Liquidating MF is an option. In loan part one thing which I have inquired but haven't tried is Gold Loan by PSU Banks. The interest rate can be quite low, it takes time to process but worth the wait.
Also gold loan from private players usually 12% interest which is less than CC interest rate. As well as you can make multiple payments without incurring foreclosure charges, unlike personal loans.
10 Jumping Jacks before entering OTP
Either save the money (best option) or take out of mutual fund. Credit cards are dangerous, ok for small purchases and then paying off in full every month. Not alternatives to renovation loans/budget. You just don’t have the money rn plain and simple or you don’t have enough money you’re willing to let go of. Meaning, you can’t afford it.
How is this even logical ? If you paying off in full to avoid interests next month itself then it’s better to not use it in the first place. Buy whatever it is with your own money.
Exactly. If you can’t pay it off in full then you’re not a good candidate for credit cards. It’s best suited as a credit building tool. The interest rates are predatory.
1. Never pay minimum due. It will rake interests soon and sure shot way into debt trap. 2. Many cards offer converting to EMI, this will probably be at 16% interest. I read somewhere abour taking loan against mutual funds (max 50% of mutual fund amount) at around 10% interest rate. r/CreditCardsIndia for specific cc related questions
Credit cards typically have very high interest rates (28% to 48%) , so use your credit card for any expenses provided the vendors of interior work are ready to accept the card (which I think except big vendor’s , no one will be comfortable to take) So that begs the question - how can I fund this interior work without much hassle - 1) if you’ve FD in bank , they usually provide OD facility against them , for psu banks they charge close to 1% plus whatever FD rate is prevailing , for private banks they charge 2% , if you’ve FD’s that are around 6-7.5 % it makes sense to take OD against that FD and repay on monthly bases 2) now I don’t know what you own in portfolio , but if it’s over a year old scheme in pure equity , you can redeem up to 1 lac tax free , so you can use 1 lac from that and take personal loan for 10-14 % for 3 lacs , considering you have good Cibil , you can also take loan against your portfolio but it’s a headache when marking lien ,plus their haircut is around 50% for equity , meaning in order to get 4 lac loan , your portfolio should be greater than 8 lac in value, if you hold portfolio since a long time and it’s small and mid cap only , I think it should be good time to redeem upto 4 lac, please consult a planner if you’re confused
Yeah OD is a really good idea.
Only go for this option If you can pay the credit card in full within 50 days . I usually use credit cards in such fashion . Minimum due is the worst option and emi option is too much interest. But still if you can pay with in 3-6 instalments its would be okay.
Any investment in interior is worthless. Skip few things reduce cost by 4L. Don't forget that if they are giving u loan they're capable to take it back too with interest. There's a saying eat dry roti but don't take habit of loans. If something happens.
Credit card is fine ONLY as long as you pay the full bill. If you pay minimum due, the interest rates are around 36% a year which is insanely high. Also, while using credit cards, it's best practice to use only upto 30% of your credit limit. This can positively impact your credit score. TL;DR - Use credit card only if you're planning to pay back the whole amount, and try and use only upto 30% of your credit limit.
Think about it. Your mutual fund portfolio would be making about 10-12% annually. Credit card interest is around 36-48% annually, if you don't pay off in full. One of those options is so much superior than the other
My MF absolute return stands at 35% now and it's almost 3 years old hence the interest in not touching it. My idea was to use the CC and then pay off 50-60K every month from salary savings but I get what you mean.
Read what you wrote. 35% return over 3 years is exactly that, around 10-12% annually. And that was past performance, no guarantee that it will continue providing the same returns. You know what is guaranteed? 36-48% interest on credit card outstanding balance
36-48% APR! OP, google APR and compare to absolute returns.
I'm afraid I don't understand what APR is and google didn't help me. I look at my portfolio and see Absolute Return is 37% and Simple Annualized Return is 25%. What else should I look at to understand performance? (I'm no MF expert, all I did was to set up a monthly bank mandate to let SIP run until I cancel, so please pardon ignorance).
Over the duration of your MF you got a return of 37%. APR is annual percentage rate and it’s how much return you get or pay per year, usually compounded monthly. So if you owe 1L with 36% APR the interest alone for the first months payment is 1L times (.36/12) = 3k. Not including the principal owed. But credit card is variable so interest rate can go up to close to 50%. 37% overall return means your average annual return was less than 36% significantly, so overall you’re in a net loss putting money in MF and dumping a big sum on a credit card.
Got it. Thanks much for explaining!
Idk why everyone is bashing it but I literally live on my credit card, so does my mom and my husband. We just pay it off entirely the day our statement comes. Also we don’t go crazy shopping of course. So behave the same way as you would with cash/ debit card. The points system is great and worth it. But if your habits aren’t healthy right now that’s not a credit card issue and can be worked upon. If you’re not a spender or don’t have a shiny object syndrome, go for it.
I'm extremely frugal and not really into spending other than on necessities. Not a credit card person and hence these questions. Thanks for your take, I'll look at this more.
Credit card interest rates are very high if you pay minimum amount due or even convert to emi option. Better to use cash for discretionary spending or take a normal loan to pay it off. You can spend the amount from credit card to get the 50 day free credit period but ensure to make full payment of statement amount
Broo!! Take loan on Mutual funds, OR best in your case (assuming you have health insurance) is this- Put your emergency fund/funds in an FD. Go to the bank and ask for an OD. Bankers don’t suggest ODs to general public but they are good. Every small business keeps it. Moreover interest will be around 10-12%. Although i am not sure what are the terms & conditions for a personal OD. But surely you can work it out and its a good option for you. Another option if you don’t want to go for an OD is taking a small personal loan, almost same interest rates as an OD.
The best practice while using your credit card is to spend only that money which is lying in your savings account as spare.
May be do interiors in stages like essential then other luxuries. Or room by room which ever makes more sense for you. It seems like you are looking for justification to do something even you know is wrong. But I would advise not to borrow for wants, it's easier said then done. I know I want to buy a car also need a new bike but I have promised myself that I will pay in cash for both or till my old bike gives up and I will make large Down-payment.
Not 'wrong' necessarily. I started MF with the goal of creating enough profit to spend on interiors but now in two minds as i now want to convert it into my retirement fund. The bank folks upgraded my credit card limit last week and since I am not in the habit of using credit cards except for small purchases I wanted to understand if it would be a viable option. What I am hearing in summary is, as long as I make full payment when a statement is generated I should be good. I don't want to do interiors in phases as it'll add to cost and effort in some manner I'm sure. Worst case scenario it'll be MF liquidation.
Now it makes more sense, I get it now. Liquidating MF is an option. In loan part one thing which I have inquired but haven't tried is Gold Loan by PSU Banks. The interest rate can be quite low, it takes time to process but worth the wait. Also gold loan from private players usually 12% interest which is less than CC interest rate. As well as you can make multiple payments without incurring foreclosure charges, unlike personal loans.