How To Use Your Credit Card Effectively

I’ve been following Shipra Baranwal on Twitter and Instagram for a while now and I am completely in awe of her diligence when it comes to accumulating points and really getting the best of her credit card. I’ve spoken to her a few times about what it takes to live a large lifestyle without the large expense. However, when she started posting on social media about her amazing Euro trip that cost her 10% of what it would have cost anybody else, I was hooked. I asked her to write a post for PennMoney about what it takes to travel and holiday using your credit card and taking advantage of the features of your card, and she kindly obliged. So without any further ado, here’s Shipra!

How To Use Your Credit Card To Travel

I recently got back from my big fat winter vacation. 15 days across 5 countries exploring the best Christmas markets in Europe. I paid one-tenth of the real price to fly premium cabins and enjoyed a luxury vacation, all because I took advantage of my credit card and the miles programs that it offered.

How Did I Do it?

When I first started working 14 years ago, I would diligently save 600 rupees every month towards a travel fund I created with my friends. This meant I put aside 10% of my humble monthly salary in the hope that I will soon start to live my travel dreams. A year later, we broke the piggy bank and the road trip to Coorg happened. We were four friends who hired a car and drove all the way from Bangalore to Coorg. I scouted out a charming 200 year old heritage home on a coffee plantation, (we didn’t have Airbnb in India back in those days), and we spent a memorable weekend together enjoying the Abbey Falls, walking through the paddy fields, observing how coffee berries grow and relishing local Kodava cuisine.

The experience was amazing and made me crave more travel, to the point where travel soon became synonymous with saving. Whenever I wanted to go to a new place, I would repeat the whole exercise of saving money, scouting for the cheapest commute, scoring a deal by bargaining with hotels and finally snapping up that trip.

It was only later that I was introduced to plastic money. I started off with a basic credit card that I got for free with my salary account. I didn’t use it for a very long time and kept it hidden in my drawer thinking that I’ll overspend or what if I forget to pay the bill. Much later in life, I learnt that by using my credit card I could travel for free. Unbelieving, I paid a fee for my first card.

In 2014, I got my first travel rewards card and paid INR 5,000 for the American Express Jet Airways Platinum Credit Card. The card allows me to accumulate 8 JPMiles for every INR 150  I spend on it, apart from a welcome gift of 10,000 JPMiles to get started and one-way free ticket on Jet Airways. This got me thinking, I can earn 8 air miles for every 150 INR spent. This meant that for every INR 1.5 lakh that I spent, I would gain 8000 air miles. Simple calculation, a one-way air mile redemption ticket from Mumbai to my hometown near Lucknow is about 8500 miles and usually costs INR 5,000. Combining the bonus miles, the free ticket and my regular spending, I could easily earn myself four one-way tickets home every year.  That’s about INR 15,000 saved, rather, 15,000 rupees earned!

And that was just the beginning! Over the years I’ve used miles to fly all around the world. Last Diwali when ticket prices were sky rocketing, I used my miles to fly to Delhi saved ~INR 25,000. At other times I’ve made good use of them to vacation in Australia, Hong Kong, London, French Polynesia and the US.

If you asked me this question in my early work days, “When choosing a card, how would you decide which one to apply for?”, my one-line answer would be- “I want a cash back card.  It’s no hassle and I get an instant return on my spending.”

I always thought it was best to keep one card, with a zero fee that gave me some kind of return value. In the past, I have been happy with Citibank’s Indian Oil Visa card that allowed me to earn 2 points for every INR 100 spend and redeem it for fuel at Indian Oil outlets. A 2% return is suppose to be good right?

No.

5 years down the line my entire perspective has changed. My choice of cards today is completely based on my spending habits and what I want to gain with the money spent. I love to travel. To fuel that passion, I keep multiple cards in my wallet, all of which earn me travel rewards in various forms and none of them are free.For example, when I’m flying Jet Airways or Vistara I use one of my airline co-branded cards to earn additional miles. When I travel international I use my Citi Prestige card and earn 8 miles for every INR 100 spend. My recent online shopping on Nykaa earned me 18 miles for every INR 100 I paid. What’s even better is that these cards don’t just earn miles but also give other benefits. For example, my ICICI Jet Airways card gets me 2 complimentary movie tickets every month and access to airport lounges.

I use my cards for everyday spends. My monthly grocery, utility bills, online shopping, salon visits, gym subscription, movies with friends and dinner outings with family, all earn me miles. So take a step back, evaluate your credit card, the way you spend and your goals – and you too can score a Rs. 5 Lakh seat for Rs. 5,000! 

Shipra, our guest poster and points expert

 

Shipra Baranwal works in the lifestyle management industry. Together with her husband she earns more than a million miles each year and writes about loyalty, travel rewards and credit cards on www.livefromalounge.comTo learn more about maximizing everyday spends to travel more follow her   @shipraatalounge on Instagram and Twitter.

7 Comments

  1. Please provide details of the Euro trip where you spent 10% of the actual cost by using miles and co-branded credit cards. I use my travel cards diligently and this level of benefit is yet to be seen. Be good if you can share an example of how you went about booking the Euro trip and where you were able to save.
    Thanks!

    • Hi Abhilash,
      You’ll find the details in my Instagram highlights #2018 Big Trip.

      Best,
      Shipra

  2. Hi Shipra, I have been slightly skeptical about airmile earning being less rewarding than the cash back model. However, with your elaboration I now think earning airmiles is a better proposition as you get to pursue your passion of ‘travel’ with freedom and flexibility. Now, for a beginner like me, the finding real worth of each mile of different airlines seems to be quite confusing. I have not even come across such a comparison in any of the travel blogs. Where can one find such info?

    • It’s true Maheshwari, cash back cards have quite a poor return rate. For example, HDFC’s top-tier Platinum cash back card gives 2 reward points(RP) for every INR 150 spent. Then 100 RP = INR 10. This means to get 10 rupees back you’ll have to spend INR 7,500. That’s less than 1% return on your spend.

      Now, if I compare this to HDFC’s Diners Club JetPrivilege card, you earn 8miles for every INR 150 spent. So, a 7,500 rupee spend will get you 400 miles which I usually value at ~70 paise per mile. That’s getting a return of 280 rupees or close to a 4% return on your spends.
      It’s a no brainer to choose a travel rewards card over a cashback credit card

  3. Hi Shipra, I have been slightly skeptical about airmile earning being less rewarding than the cash back model. However, with your elaboration I now think earning airmiles is a better proposition as you get to pursue your passion of ‘travel’ with freedom and flexibility. Now, for a beginner like me, finding the real worth of each mile of different airlines seems to be quite confusing. I have not even come across such a comparison in any of the travel blogs. Where can one find such info?

    • There is no fixed formula to value each mile though there is a broader framework one can keep in mind. As an example, I don’t use my miles where I get less than a 70 paise per mile value. Anything above 1 rupee is a good value for redemption. On the other hand, the value of miles always increases in premium cabins because the difference in ticket price from economy to business is 3x and the number of miles required in only 2x.
      .
      A Mumbai to London one-way ticket costs ~30k INR and requires 42,500 miles for redemption. Therefore, 1 mile = 40 paise usually on this sector on economy redemption. However, a business class seat from Mumbai to London costs ~85k INR and requires 85,000 JPMiles. The value of each mile now is 1 rupee and has gone up by 150%

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