What Happens If I Overspend On My Credit Card - Credit Card Overspending

When it comes to using your credit card, you may see yourself as credit-card rock star. After all, you always pay on time, and even have a nice credit. When compared to newbie credit card holders, you’ve got the basics of usage right.

However, you may be using your credit card too much.

Credit cards are wonderful financial instruments of course. They are handy because they allow you to get instant loans whenever you want. However, this comes at a risk since you need to plan your expenses. You need to repay those loans as well. Taking too much credit in a short time can be risky.

Now, your credit utilization rate may be healthy, but don’t let that make you complacent. There are many elements of financial health, so just because the credit utilization rate is on the safer side, it’ll be prudent not to get complacent.

Here are some danger signs to watch out for so that you can control your spending patterns.

You’re continuously behind your savings goals

When you are overspending, you are falling behind on your savings goals. For example, you had decided to save Rs. 1,50,000 this year but at the yearend you found that you have Rs. 100000 saved. Similarly, you may be falling behind on saving or your retirement fund, investment plans, and more. Neglecting these things or the long term can put you in a serious financial position.

Always make sure that you are putting money aside for these.

Buying out of boredom

When you are bored, it can be very easy to get on a splurging spree. It can be hard to resist buying things on a whim when you are bored out of your senses. The main problem is, it can be pretty expensive.

This can be especially troublesome later on if you are buying things with a credit card, or even by other forms of EMI. These are purchases you don’t plan for, and these can easily be hard to pay back later without strong budgeting.
You are breaking your own budgeting rules

Maybe you do have some rules for spending and shopping, even when you don’t have a strict budget. But when you break these rules? You get a lasting guilt feeling. Now, splurging once won’t damage your personal finances, but uncontrolled ones may.

How to break through this cycle of overspending?

Here are some tips to do just that.

• Make a better budget: This does not mean make a complicated budget. Those are not necessarily more effective. Something as simple as a weekly credit card spending rule or limit can be enough. You can also use the 50/30/20 rule. In this, 50% of your net income is for your needs, 30% is for wants, and 20% is debt settlement.
  
  
• Study credit card statements: Study this, and you may find a pattern to your overspending. Rather than using a credit card, start using a debit card, which is safer in controlling purchases.
  
  
• Do a temporary spending freeze: If you have a habit of overspending that is harming your finances, try this one. Freeze spending for a week to start with. You can then increase these to month-long freezes.

How to Get Your Credit Card Application Approved - Understand Your Credit Score

Applying for a credit card might seem to be an easy process, but getting approval for the card of your choice needs a lot of critical planning. Experts from mymoneykarma are here to enlighten you on a few quick points that you must consider before submitting your application.

Understand Your Credit Score

When you apply for a credit card, the issuer refers to your credit report to decide whether your application can be approved or not. It is the predominant factor that determines your eligibility for a particular credit score. If your credit score is below 600, most lenders interpret it as bad credit credentials. A score between 630 and 690 is considered to be average, and something between 690 and 720 indicates a good credit history. Anything above 720 is generally considered to be excellent, and you can expect yourself to be deemed eligible for the desired credit card or loan.
Rewards credit cards are desirable for most individuals; but they require good or excellent credit standings. If a rewards card is your target, you better buck up and improve your credit score. You should make timely payments, keep your credit balance low, and avoid getting into debt. If you do not have enough credit points to qualify for a rewards card, consider secured cards to help you build credit; you could qualify for a rewards card sometime in the future.
Reduce Your Credit Balance

Your credit utilization, or the portion of your credit limit that you spend in each billing cycle, has 30% weightage in determining your credit score. Never spend the entire credit limit available. Your credit utilization rate reflects your spending habits, and you are expected to be mature and spend responsibly.

Most financial advisors say that a credit utilization of 30% and below is ideal for your credit health. That means if your credit limit is Rs.1,00,000, then you shouldn't spend more than Rs.30,000.
Try to pay off your balances more than once in a month to maintain an average credit utilization of less than 30%. Alternatively, devise an effective strategy to keep your credit utilization low. If you can convey to potential lenders that you handle credit responsibly, it is more likely that they will trust you with more credit.

Search Patiently

The search for the perfect credit card could be quite frustrating. At the same time, the offers could be incredibly lucrative. Do not rush with your application. Whether your application is approved or not, each credit card application turns up on your credit report as a hard inquiry.

Too many hard inquiries will make you seem desperate for credit, and lenders will refuse to trust you. Don't get tempted by a large sign-up bonus or a tantalizing rewards program. Be patient and weigh your chances before applying.

Foolproof Application

The lenders understand your creditworthiness from your credit report, but they also need to calculate your debt-to-income ratio (DTI) before approving your application. Your debt-to-income ratio indicates your ability to repay. However, your income is not a part of your credit report.

If you wish to qualify for a decent line of credit, you must prove to the lenders that you earn well. Include your total income in the application, including any other source of income apart from your full-time job. You might need to provide documents as evidence for the same. Be careful - don't provide false information on the application: it is considered to be a credit card fraud.

You should also calculate your debt-to-income ratio before applying. By doing so, you can gauge your chances of getting approval for a credit card. A high DTI indicates poor chances of getting new credit.

What is a Credit Card Cash Advance? -

Credit cards are such amazing inventions, right? Those rectangular pieces of plastic open up a whole new world of funds and freebies. One swipe of a credit card can get you anything you want or need, including cash of course. It is nothing but convenience right at your fingertips. However, are you aware that such convenience comes at a steep price - literally! All credit card users are hopefully aware of the risks of debt that tag along all instruments of credit. One tiny, seemingly trivial mistake like missing a due date can cost you dearly. However, nothing is more of a pitfall than credit card cash withdrawal. Whether you make a mistake or not, cash advances can cost you a fortune for no significant fault of yours.

What is a Credit Card Cash Advance?

Did you know that you can withdraw money from ATMs using credit cards?

When you use a credit card to withdraw liquid cash from an ATM, the credit card companies call it a "cash advance." Some lenders also provide convenience cheques to their customers to pay for purchases in situations where the vendor doesn't accept credit cards but accepts cheques.

The process of taking a cash advance is the same as that of making a cash withdrawal from an ATM with your debit card. However, when you withdraw cash using a credit card, the money isn't yours - you are essentially pulling funds from your credit card account.

Credit cards have a cash advance limit, denoting the maximum amount of cash that can be advanced against the credit card's balance. The cash advance limit is usually much lower than the overall credit limit. Typically, it is set as a proportion of the credit limit - if the credit limit changes, so does the cash advance limit. Interestingly, currency purchases made through credit cards also count as cash advances - be it foreign currencies, cryptocurrencies, or stocks.

Cash advances should ideally be used only in emergencies because they come with a higher APR than your regular credit card balance, and banks often charge cash advance fees in addition to ATM fees.

What's the Problem Here?

Well, everything! Unbeknown to you, credit card issuers impose an entirely different set of terms and conditions on cash advance transactions. If you wish to understand that, you first need to know how normal purchases on credit cards are generally billed.

Credit Card Billing System

Credit cards have a fixed billing cycle with a billing date. The bill, with a list of purchases made over the entire billing cycle, is generated on the billing date. This bill has a due date by which you have to pay the amount back to the bank. You can either pay the total outstanding or the minimum due. The minimum due is a certain proportion of the total outstanding amount which you must mandatorily repay every month in order to avoid defaulting.

Let's assume that your credit card bill date is the 2nd of every month. The due date is typically 22 days after the billing date, i.e., 24th of every month. The purchases you make even a day before the billing date - let's say on the 1st of a particular month - becomes a part of your current bill, which has to be paid by the 24th of the current month. If not, a late fee, as well as an interest rate, is levied on the amount.

The purchases you make on the 3rd of any month will have to be repaid on the 24th of the next month; so, you get at least 50 days of free credit. However, this logic does not apply to cash withdrawals using a credit card. There is no concept of a 'free credit period' in the case of cash advances.

Cash Advance Billing System

When you withdraw cash using credit cards, the interest starts accumulating from day one. This interest typically varies from 2.7% to 2.85% per month. Since credit card interest is compounded monthly, the effective APR (Annual Percentage Rate) tends to be around 38% to 40%! Moreover, a cash withdrawal charge is also levied, which is either a flat rate or around 2.5% to 4% of the withdrawn amount, whichever is higher.

For some cards, the APR for cash advancement may be the double of the APR for regular purchases. Additionally, ATM fees and foreign transaction charges are imposed if you are abroad while making the transaction. This might catch you off guard, since most of us are unaware of these different norms.

So, drawing on our previous example, let's assume that you have withdrawn Rs.10,000 on the 3rd of the month using your credit card. Interest will be piling up till the time your bill is generated, i.e., the 2nd of the next month - after 29 days. These 29 days are not interest-free.

Assuming that you pay the bill right away, the interest for this period, at the rate of 40% per annum, on an amount of Rs.10,000 works out to around Rs.333. This interest is over and above the cash withdrawal charges of approximately Rs.350. Effectively, you end up paying an extra amount of at least Rs.680 in just a month for a withdrawal of Rs.10,000 using a credit card.

Imagine what will become of this figure if it keeps compounding for a year? The longer you take to pay off the amount, the heftier the interest will be.

What is the Right Way?

Anything but cash advances. If you can ever help it, never withdraw cash from credit cards for everyday expenses or fun or even to make ends meet until your next payday. Use your credit card for retail purchases only - pay your utility bills, buy your groceries, fund your entertainment with credit cards.

Always use a debit card to access cash. If you simply fall short on money, consider a side gig for a little more cash, sell off a couple of your belongings on OLX, or just approach someone you are close to. Even a personal loan has lesser charges than this. A cash advancement can never be a good solution to your problems, as it will only add more.

How Well Do You Know Credit Card Reward Points?

Reward programs often motivate customers to utilize a credit card for bill payments, shopping, dining, travel, etc. In exchange, the users can accrue points and redeem them later for various perks and gifts. But why do these card companies offer reward points in the first place? Let's delve into a more in-depth discussion to discover the nuances of rewards points.

What are Credit Card Reward Points?

Whenever you use your credit card for any transaction, the credit card issuers earn an 'interchange fee' from the merchant, which varies between 1% - 2.5%. The outlet may negotiate for a lower fee if its sales volumes are soaring.

Along with the 'interchange fee,' credit card companies also make money from the annual fee and high interest earned on penalties of unpaid bills from the card users. So, to attract and retain customers, the company allocates a minuscule portion of its earnings (primarily from the interchange fee) to the users as reward or loyalty points.

Benefits of Reward Points

• Air miles: If you are a frequent flyer, then air miles are a bliss for you. As a card user, you can redeem your reward points into air miles with the airlines that are in collaboration with credit card companies and get amazing discounts. Here are some examples of airlines that are associated with reward programs:
          Air India - Flying Returns
          Vistara - Club Vistara
  
  
• Gift vouchers: Another benefit of reward points are gift vouchers, which may range from a minimum of Rs. 100 to Rs. 5,000 or more. You can utilize these gift vouchers anywhere as per your convenience, either at the brand's store or an online store. The categories of gift vouchers include apparel, books, groceries, lifestyle, food, beverages, and much more.
  
  
• Room miles: Banks also affiliate with hotels for their reward programs, which provide customers with the leverage of redeeming their reward points into room miles at the partnered hotels.
  
  
• Cashback: If gift vouchers and miles don't woo you enough, then a cashback offer may do so. The cashback that you receive on redeeming reward points can be used either against your credit card bill or for shopping. If you have a substantial amount of cashback through reward points on your plate, it could help you save a considerable amount of money.
  
  
• Loyalty Points: Loyalty points are not new in the game of reward programs. However, if your bank offers you the provision of accumulating reward points earned on your debit as well as credit cards (of the same bank) under one roof and redeeming them together, isn't that a fascinating scheme?
  
  
• Let's discuss this with an example of Axis Banks' eDGE loyalty rewards program. Here, as a loyal customer, you get to accumulate reward points on the credit/debit cards along with savings accounts and foreign remittances.

How to Calculate Reward Points?

Let's consider an instance: Suppose your credit card bill reflects 10,000 points against all purchases that you have made in the last one year, then what will the value of these points be in monetary terms?

The value of the reward points may vary from one company to another and can lie anywhere between 10 paise/point and Re.1 per/point. It can be determined by the price of the gift available against redemption. For example, if a credit card company is offering a wrist watch worth Rs 1,000 against 10,000 reward points, then each reward point is worth 10 paise.

How to Earn Reward Points?

• Daily spendings: Use your credit card even for minimal-amount transactions.  This can help you earn a substantial number of reward points, ranging from 1 - 10 or even more, depending on your spending frequency.
  
  
• Welcome bonus points: Every bank offers some bonus points to welcome their customers. Before purchasing the credit card, check out the terms and conditions stated by the bank to earn these bonus points. If the spending threshold suits your budget, then this can be an excellent opportunity for you to obtain a considerable number of reward points by purchasing within 90 days of card issuance.
  
  
• Co-branded cards:  Reward points on co-branded cards are 5-10 times higher than other cards. Co-branded cards are launched by the card companies in partnership with airlines, petrol pump companies, and branded stores. So, if you use a co-branded card at any of the associated petrol pumps, you can earn extra reward points and discounts.
  
  
• Spend on special occasions: You can also accomplish bonus points for using credit cards during festivals and other significant events. For example, during Diwali, some credit card companies offer 50 bonus points on the first online transaction.
  
  
• Premium Purchases: Spending on high net-worth items such as jewelry or international travel bookings can also fetch you more reward points.
  
  
• Use a premium card variant: If you use a card variant which is premium or super premium, you can earn a substantial amount of reward points for every purchase made. For example, Axis Bank My Zone card members can accrue around 40 reward points on every Rs 200 spent on dining during weekends.

How to Redeem Reward Points?

Before redeeming your accumulated bonus points, check out the following terms:

• Minimum reward points: Find out the minimum number of reward points that you require to reach the stage of redemption, as mentioned by the credit card issuer.
  
  
• Expiration Date: Reward points have an expiry period, which can vary from 1 to 3 years. Banks deduct the accumulated unused reward points at the end of every financial year as they are a liability on the banks' records, which they would want to eliminate. It is also a technique used by banks to coax card users into redeeming the points on time.
  
  
• Redemption Fee: Reward redemption entails a fee of around Rs.100, which the bank levies to redeem the points.

Avenues of Redemption

You can redeem your reward points through any of the following modes:

• Customer Care: Approach the customer care representative of your bank, either through phone or email, and place your request for redemption by providing the essential details. Download the redemption form, fill it in with the necessary information, and send it to the bank through e-mail or post as instructed by the executive.
  
  
• In-Store: Banks have also partnered with several retail brand stores, which let customers shop and pay for their purchases through their accrued reward points. Any remaining balance for the purchase will be charged via your credit card.
  
  
• Online: In partnership with numerous brands, most reward programs have started offering an array of categories such as garments, home appliances, and cosmetics, besides gift vouchers and charity donation, wherein you can utilize your reward points to shop online from any of these categories. Online redemption is the most convenient option among others.

A Few Tips to Be Vigilant

• Read the terms and conditions that accompany credit cards.
• Make sure that the reward system suits your financial needs and lifestyle. For instance, If you aren't a frequent traveler, then don't choose credit cards that provide air miles.
• If you are unable to comprehend your rewards account, then get in touch with a customer care executive and learn the nuances of your credit card reward points.

Effects Of Bad Credit Score - Reason for Bad Credit

 There can be several reasons why you have a bad credit score:

• You have missed payments unintentionally because you forgot the payment due date.
• You have made payments late without knowing the impact of it on your credit score.
• You have generated too many hard inquiries against yourself by applying for multiple lines of credit at the same time.
  

But whatever be the reason, a bad credit score can cause you trouble in many circumstances. Wondering how? Let's dig a bit deeper into it.

Side-Effects of Bad Credit

You May Not Get Approval on Loan/Credit Card Applications

A credit score is one of the prominent parameters that banks consider while checking your loan or credit card application. Although other factors such as your income, employment status, and obligations (loans, cards) also matter; the credit score helps the banks in determining your creditworthiness. Thus, a bad credit score can lead to rejection of the application, since no lender would be willing to trust you.                            

You May End Up Paying a Huge Rate of Interest

Regardless of a bad credit score, it is likely that a few lenders will agree to give you a loan. Don't be too glad, however, as you may end up repaying a hefty amount for it.

Let's discuss this with an instance: You get a car loan of Rs.10,00,000 for 4 years at a fixed interest rate of 12%. When you repay it, you end up paying an interest amount of Rs.264,024 on Rs.10 lakhs.

Now imagine a situation where you have a good credit score. You have been approved for the same loan amount for the same duration, but this time at a fixed interest rate of 9%. In this case, the total interest amount that you have to pay will be Rs.194,482. Subtract Rs.194,482 from Rs.264,024 - the difference is Rs.69,542.

Is it worth to pay that much extra for the same loan amount? Ultimately, someway or the other, a low credit score leads to a loss for you.

You May Get a Loan, but on Unfavorable Terms

While there may be lenders who would still approve you for credit, beware of the terms, which may not be in your favor at all. Either you will get the loan on a higher rate of interest, or you will not be approved for the requested amount. Hence, these circumstances will put you under the pressure of either paying more or arranging the extra amount from other sources to serve your purpose.

Same is the case with credit cards. You may get approved for a secured card against a fixed deposit, but remember that secured credit cards generally have higher APR ranges than unsecured credit cards. This means that you will pay more interest while using them.

Starting Your Business Will Not be a Breeze

If you have aspirations of being an entrepreneur, it may either go in vain altogether or a hefty debt trap may put an end to your plans midway - all due to a bad credit score. Once again, the reason would be the same - that you won't get approval from banks for the funds to execute your plan.

In case you approach other financial institutions such as NBFCs, it may burn a hole in your pocket as they will take the risk of lending you money only at a really high rate of interest.

You May Face Emotional Distress Due to This Bottleneck

Let's think of some scenarios; where you decide to pursue higher education or you wish to buy a home. Essentially, these are your life goals. If you fall short of fulfilling them due to a bad credit score, will it not have an adverse effect on your emotions?

Also, don't forget that a bad credit score doesn't improve in a day; it takes 6-12 months of responsible behavior towards credit repayment. Building your credit score takes a great deal of discipline and self-restraint, very often leaving one feeling frustrated and helpless.

How Long Do Late Payments Affect Your Credit Score?

Payment history is the most important determinant of your credit score. A late payment carries almost 35% of weightage, and a single failed or missed payment can drastically bring down your credit score. Your current credit score, the delayed time in making a payment, and the frequency of missed payments together determine how much of a blow your credit score will take.

• Delayed or missed payments can stay on your credit report for up to seven years. It is removed after seven years provided that the amount has been repaid and the account is still active.
  
  
• Late fees are added to late payments. Credit card APRs are generally quite high. If you drive your account into delinquency, there shall be a charge in the form of penalty APR, and you would end up paying much more than you had initially borrowed.
  
  
• Failing a payment easily spoils your impression in the eyes of the lenders. They would lose their trust in your creditworthiness and increase your APR. If you were under any low-interest promotional scheme, those benefits might even be canceled.

What Can You Do If You Have Made a Late Payment?

Listed below are a few things that you should do when you miss a payment:

    Try to Settle the Account ASAP: Pay the amount immediately when you realize that you have missed a payment. If not the full amount due, pay at least the minimum amount required.

• Try for a Waiver: When you miss a credit card payment, an exorbitant late fee is added to your outstanding balance. You could avoid it by approaching the creditor and asking for a waiver. If you have a clean payment history and are careful to be polite enough, this could work. If you could, it would also help if persuaded the creditor to keep the negative information from the report that they submit to the credit bureaus.
  
  
• Set Reminders for Yourself: If missing payments becomes repetitive, you better be more careful and find a way to remind yourself. Set reminders - it could be a wall calendar, cell phone reminder, or reminders through SMS/email.
  
  
• Set up Autopay: If you are too lazy to follow up on the reminders, consider setting up automatic payments. Link your credit bill to your savings account and set up an automatic payment on a day before the due date. Also ensure that your account has enough money for the automated transaction.
  
  
• Keep an Eye on Your Credit Reports: Stay alert and keep a check on how your late payments are affecting your credit score. Lookout for reporting errors. Use mymonekarma’s credit score tracker to stay alert and updated.
  
  
• Pay on Time Henceforth: Pay bills quickly to prove that you are responsible. If you can show that you are sincerely repaying your balance, your credit scores are more likely to improve. You must verify that the late payment was just an anomaly in your otherwise pristine credit history.

By the way, did you know that you are entitled to one free credit score per year? That’s right! There are some organizations that give you your credit score report once a year for free.

How Much Does a Late Payment Hurt Your Credit Score?

If once in a while you miss your payments and pay it within 30 or maximum 60 days, then it won't cause any lasting damage to your credit score. However, frequent as well as recent (in the last two years) payment failures can be detrimental. A payment delayed by 90 days or more can make your credit history to plummet and mess up your credit score for up to seven years. It indicates that you might repeat the mistake, and you become a risky borrower. Most credit bureaus follow this pattern:

• 30-60 Days Late: If it is a one-time failure, the damages are less, and you can quickly revive. Recent 30-60 days delay causes the most damage, but it wanes off over time. However, if it happens often, the damage can be severe.
  
  
• Ninety Days Late: This means severe damage to your credit score. The effects will remain for up to seven years.
  
  
• 120+ Days Late: If your payment gets delayed by 120 days, your debt will likely be sold off to a third-party agency. It could become a 'collection account' or a 'charge-off account.’ Such circumstances significantly damage your credit report. Not only does it bring down your credit score, but it also adds a disparaging remark in the report.
  
  
• Repossessions or Foreclosures: If you drive your home loan or auto loan account to a high level of delinquency, the blow to your credit score will last for seven years. A negative remark will be added to your credit report as well.

Unpaid Debts and Accounts in Collection - What is a Collection Account?

Debts are dangerous - even more so if you haven't paid them for a long time. Debts not only bring down your credit score but can also harm your credit history if they pass into collections. An account in collections can be catastrophic to your credit health. It is in your best interest to know how it can affect your credit and how you can deal with it. Before we delve into all that, let's quickly understand the concept of an 'account in collection.'

What is a Collection Account?

When you fail to repay a loan for a really long time, your creditor turns your account over to a third-party debt collection agency. The collection agency takes over the responsibility of collecting the debt from you on behalf of the original creditor. In such circumstances, your account gets listed as a 'collection account.' The credit bureaus collect the payment report and compile them into your credit report.

A debt generally becomes a collection account after it becomes considerably delinquent. If you have stopped paying a medical bill or a credit card bill, the original company might write off the debt as a loss and sell it to a collection agency, and henceforth, the collection agency will make attempts to recover the amount.

The original creditor doesn't need to notify you if your account is being sent out to collections. However, you can gain access to this information whenever you check your credit report. You can view the full report on the 'collections' page or section.
How to Find Out if You Have Accounts in Collections?

For instance, say you took a home loan last year from a bank. This year, you find you have no money to keep paying the EMIs. If the bank is unable to get its returns, it writes off the account as a bad debt and loss to the company. It also gives this account to a collection agency.

A collection agency does all that it legally can to take the remaining money from you, and even take you to court for failing to do so.

The bank is not under any obligation to tell you when your account is given over to a collections agency. It is your responsibility to know when it happens and which agency you owe your money to. Thus, it begs the question: how can one find out if you have any debt or accounts in collections?

• Access Your Credit Report: The very first thing you need to do while searching for any debt accounts in collections is to check out your credit report. Three major credit bureaus, namely Equifax, TransUnion, and Experian, can provide you a credit report for free every 12 months. In case you have any debts in collections, they will show up in the report.
  
  
• Check If a Credit Agency Contacted You: Collection agencies specialize in collecting back the money owed by you to the bank, or any other lender for that matter. However, collection agencies don’t get paid if they don’t get the money back. This means that they will try to contact you. If you recently changed your address or phone number, they won’t be able to reach you. However, you can get their details from your credit report.
  
  
• Ask the Original Lenders: If you are fairly sure that you may have debt in collections, but do not know which agency to contact, ask your original lender. As they stand to gain the money from you, they would be more willing to tell you. However, there shall be no grounds for negotiation with the original lender if the debt account is already sold to the collection agency.
  
  
• Check the Credit Report Again for Contact Info: If you want to know how to pay the designated collection agency, you need to check your credit report. It should have all the necessary information which allows you to contact the collection agency.

How Do Collections Affect Your Credit Score?

If you have a high credit score at the time when the collection agency reports the debt to the credit bureaus, you are likely to lose a lot of points.

The amount of your debt also plays a role in deciding the amount of damage that your credit score will receive. If your debt amount is considerably less, it might show up on your credit report, but it won't hurt your credit score much.

Different credit scoring models have different ways of dealing with your debt. Some models consider the type of mortgage; some models even disregard collection accounts once the debt is paid off and settled.

However, a credit score drop due to a collection account can severely impact your future financial plans. If you have a recent collection account or an old unpaid one, creditors can easily deny you credit cards and loans.

Tips to Manage a Collections Account

The way you handle your accounts in collection largely depends upon your situation. If all the information in the collection account is accurate, you could try to negotiate with the collection company and settle it. Simultaneously, make sure that you have kept your other accounts and debts updated.

With time, the damaging effect of the collection account on your credit score will recede. If you pay all other bills on time and project a responsible borrowing habit, your credit score should revive quickly.

Disputing an Erroneous Collections Account

Just like other reporting errors, your collection account might also contain a mistake. The record might be outdated, or the report might provide incorrect information. If you can identify an error, you must seize the opportunity and file a dispute with the concerned credit bureau.

If you notice that your credit report contains records of a delinquent collection account that is more than seven years old, you can request the bureau to remove the information.

Credit Card Usage Tips - Apply for Credit Card

Banks try their best to retain their existing cardholders and work hard to attract more. With this in mind, banks are often willing to offer a number of perks and benefits to their customers. It is always at the customer’s discretion that these privileges and liberties are put to use.

Here are a few avenues that you could explore to receive additional perks and improve your credit health.

Limit Your Expenses

If your credit limit is high, you will tend to spend more. Increasing your credit balance leads to an increase in your credit utilization rate, which inevitably brings down your credit score. Also, if you spend more than you can afford to repay, you might incur a debt.

You can ask your issuer to set caps on the amount of purchases that you are allowed to make so that you can keep your credit utilization rate low, preferably below 30%. Alternatively, you could cap your expenses yourself by setting up a monthly budget.

Change the Due Date

Timely payment is crucial for your credit score. A late or missed payment can have long-lasting repercussions. However, if you have multiple credit cards with different due dates, you could get confused and miss a payment unintentionally.

You could sort out this problem by speaking with the card issuers and asking them to move your monthly due dates to a single date. That being done, you will have just one date to remember and the chances are that you will not miss any payments anymore.

Increase Your Credit Limit

You can negotiate with the card-issuing company to decrease your credit utilization rate by increasing your credit limit. This request will lead to a hard inquiry; so you must carefully evaluate your chances of approval before applying for the raise. If your current credit limit is low, or if you carry a balance, you might try to request an increase in your credit limit.

The decision is entirely at the company's discretion. However, if your request is approved, you must be very careful with your expenses. A higher limit might tempt you to spend more.

Reduce Your Interest Rate

If you have been associated with your bank or your card-issuing company for a long time, you would definitely be a valuable customer for the bank. There is no harm in politely requesting your bank for a lower interest rate, provided that you have maintained a clean credit history with timely payments.

If approved, a lower interest rate can help you save money if you were ever to carry a balance in future.

Remove Late Fees

If you've had a spic and span track record of timely payment, you can approach the card-issuing institution and ask them to waive the late fee for your late payments. Some cards also have an offer in which the late fee of your first missed payment is discounted.

However, this is just a backup option, and you should ensure that you make all payments on time.

Annual Fee Waiver

Some credit cards charge a hefty annual fee, and many customers even cancel credit cards to avoid it. In case you too are thinking on the same lines, stop and reflect! Closing an account can affect your credit age, and you wouldn't want your credit score to drop because of that.

If your issuer values you, they might be willing to waive your annual fee. You could try talking to them and ask for a waiver.

The Difference between Hard and Soft Inquiries

Let's say you are a strict and disciplined spender and you work really hard to maintain a five-star credit score. In order to build your credit, you wanted to take another credit card; however, your search for economically viable credit cards led to several hard inquiries and your superb credit score took a blow. Won't you be annoyed? Well, I certainly would.

A hard inquiry is that irritating factor which affects your credit score for almost no fault of yours. And then there are soft inquiries too. It's important that you understand the difference between the two. Why don't you read this article to find out more about these two types of credit inquiries?

What is a Hard Inquiry?

Hard inquiries take place when a lender or a credit card issuer conducts a check on your credit while making a lending decision. These inquiries generally take place when you apply for a new line of credit. Typically, a hard inquiry cannot be processed without your authorization.

A hard inquiry appears on your credit report. It reduces your credit score by a few points. It is an important decision-making factor for potential lenders. A single hard inquiry might not be very appalling, but a bunch of simultaneous hard inquiries can be serious. The credit score damage from a hard inquiry can be revived within a short span, but the data stays on your credit report for a few years.

How Do Hard Inquiries Impact Your Credit Score?

Too many hard inquiries at a time will not only reduce your credit score but will also make you seem too desperate for cash. Lenders will not be able to trust you. Multiple hard inquiries might add up to multiple new accounts. Opening numerous credit accounts at a time indicates that you are struggling to pay your bills or you are probably overspending. Hence, you are not worthy of getting credit anymore. That is primarily the reason why a hard inquiry affects your credit score.

However, most of the credit scoring models are more considerate than you think. They consider multiple hard inquiries for the same product within a short period as a possibility that you are looking for the best loan deal available. They would treat them as a single hard inquiry. In such a scenario, you need not worry much about your credit damage.

What are the Common Hard Inquiries?

A hard inquiry is conducted by the respective issuing company whenever you apply for one of these:

• Mortgage applications
• Auto loan applications
• Credit card applications
• Credit limit increase applications
• Student loan applications
• Personal loan applications
  

How Long Do Hard Inquiries Remain on Your Credit Report?

There isn't a set rule for this, but most credit bureaus remove the hard inquiries from your credit report in two years. The impact of hard inquiries reduces over time. If you find an unauthorized hard inquiry or an erroneously reported one on your credit report, you could approach the concerned credit bureau and get it removed.

If you happen to have multiple hard inquiries for the same product within a brief period, potential lenders might not deem it very important while considering you for a credit. If your credit report exhibits a history of on-time payments and a consistent low credit utilization ratio, your hard inquiries will not matter much while getting a loan.

What is a Soft Inquiry?

Soft inquiries take place when you check your own credit score or you allow someone else to review your credit score. Typically, a soft inquiry occurs when an employer or a company goes through your credit report as a part of your pre-hiring background verification, or your credit card company checks your credit report without your permission to check if you qualify for certain offers.

Soft inquiries are not linked to any credit application; hence, they do not affect your credit score. You can view them in your credit report, but potential lenders cannot access the information.
Common soft inquiries

These situations could lead to soft inquiries:

• Checking your credit score on mymoneykarma
• Checking for "Pre-qualified" credit card offers
• Checking for "Pre-qualified" insurance quotes
• Employment verification or background check
  

How to Manage Your Credit Inquiries

Well, you surely do not want your credit score to drop for something as annoying as hard inquiries. You are not even directly responsible for them. These tips will keep you alert and safe from unexpected hard inquiries.

• You must apply for credit only when you are in dire need.
• When you apply for a loan, make sure shopping has been completed for a brief period.
• Keep a check on your credit report to ensure that the hard inquiries are the ones that you really initiated.
• Read all documents before signing - do not authorize a hard inquiry unknowingly.
• Ensure that all other factors impacting your credit score are in good shape.
  

If you are wondering how a particular inquiry will be classified, feel free to ask the company or the financial institution involved to understand whether it's a hard or a soft credit inquiry.

How to Save Income Tax - Ways To Reduce Income Tax India

As July knocks on your door every year, so does the need to file your tax returns. Pull up your sleeves and file your ITR asap! The stress doesn't end with filing for tax returns but extensively involves you to find means to reduce income tax. So while you’re at it, why don’t you figure out some better ways to save income tax?

mymoneykarma is here for you. Whether you’re a veteran taxpayer or a newbie - you need to plan your investments correctly to reduce income tax. The income tax laws may appear intimidating but behold and read more to unveil 25 amazing ways to save more.

Little efforts and voila! Let's look at the ways to reduce income tax that can help you save a chunk of your salary to tick off the next thing from your checklist.

1. Tuition Fees

Income Tax laws provide the opportunity to compensate for the expenses you incur on your kid's tuition fees by including them while filing ITR. You can claim this deduction through section 80C of the Income Tax Act and reduce income tax.

2. Deduction on Rent Paid (apart from HRA)

As per the provisions mentioned in section 80GG of the IT Act, you can still get a tax benefit and need not be flustered if you don’t get HRA in your salary. You can claim a deduction of up to Rs.5000 a month under this clause.

3. Repayment of Home Loan

Did you know that your home loan can help you save income tax?

Fascinating, right? You can get tax benefits on both principal and interest components of your home loan installments. You can claim these deductions under section 80C, section 24, and section 80EE of the IT Act.

4. Repayment of Education Loan

Most youngsters resort to education loan to curb the rising costs of educational courses. Such deductions are also available on your education loan EMIs and can help you save a lot. All these deductions are available under section 80E to provide you a tax benefit for interest paid on education loan.

5. Pension Funds

Did you know that your retirement plan can also save you from the burden of income tax?

One of the best ways to secure your life after retirement is to start investing in pension funds. And investing in pension funds helps you to reduce income taxes. You can enjoy such tax benefits under section 80C / 80CCC / 80CCD(1) / 80CCD(1B) / 80CCD(2).

6. Health Check-up & Medical Insurance

Health is wealth!

It is genuinely applicable when you are hunting for means to save income tax. Jokes apart - according to the income tax laws, these expenses can help you get a deduction of up to Rs 60,000 under section 80D of the Income Tax Act if the necessary documents are provided.

Now let’s move on to some lesser known tax -saving hacks.

7. Medical Expenses of Disabled Dependent

If you have a dependent person in your family who is suffering from a disability, then the IT laws let you avail tax benefit under section 80DD. This deduction is meant to help you take care of your disabled family member who is dependent on you, and it can also help you save up to Rs 1,25,000 from your taxable income.

8. Medical Expenses of a Disabled Individual

Similar to deductions under section 80DD, individuals who are suffering from a disability also get to avail tax benefit under section 80U. These provisions help you save up to Rs 1,25,000 from your taxable income and reduce income tax.

9. Treatment for Specified Diseases

Specific diseases or ailments, like HIV-AIDS or cancer, also let you avail tax benefit under section 80DDB based on expenses incurred.

10. Charitable Donations

If you willingly want to help the people in need, then there is another reason to rejoice. While donating, you not only get to achieve your inner peace but also get to save income tax. Several types of donations are entirely exempted under Sec 80G of the Income Tax Act. However, there is an upper limit on cash donations and capped at 10% of the gross total income.

11. Donations for Scientific Research or Rural Development

Any contribution that you make for any scientific research or rural development is also eligible for deduction under section 80GGA.

Now, let's delve into some of the best and most popular tax-saving investments under 80C.

12. EPF

Most employers open an EPF account for you, which means that you are already contributing to your provident fund. Hence, the contribution that you make to your EPF can be claimed as a deduction under section 80C to save income tax.

Those who do not have EPF deductions or those who wish to invest more than the customary EPF deductions may choose to open a voluntary provident fund account (VPF). You can voluntarily invest more (up to 100% of your basic salary + DA). VPF earns you a tax-free interest at 8.4%, and this can help you save a significant amount.

13. PPF

Other than PF, another option is to invest in public provident fund or PPF. Just like PF, you can get a tax deduction on your contributions while the resulting interest income & maturity amount stay exempted from tax.

14. Sukanya Samriddhi Scheme

This scheme is only available for parents or guardians of a girl child and is one of the best tax saving investment options and that help you to save considerably.

15. NPS

NPS or National Pension Scheme is a saving scheme offered by the postal department. It is considered to be a saving scheme with zero risks and is also eligible for 80C deduction.

16. FDs and ELSS

Bank FDs that have a lock-in period of 5 years and certain Mutual Fund SIPs that have a 3-years lock-in period are eligible for income tax deduction under section 80C.

17. Post Office Deposit Account

You can also open five years fixed deposits with any branch of Indian Post Office, and it would work like any other fixed deposit account. But, there's a catch - this deposit account will have a lock-in period of five years, and it offers double the benefit of return on investment. A sure shot way to save income tax and grow your money.

Salaried individuals get access to these additional tax benefits:

18. HRA Deduction for Rent Paid

You can claim the HRA allowance in your salary as a tax deduction if you live in a rented apartment.

19. LTA Deduction for Travel Expenses

LTA can fetch you additional tax benefits. The LTA concession can be claimed for two journeys in a tenure of 4 years, and this can be claimed as a deduction.

20. Tax Benefit on Gratuity

Gratuity received on retirement or termination or on becoming incapacitated or any amount received by the widow of the deceased employee, children or dependents is tax-exempt up to Rs 10,00,000. But, this is subject to various clauses.

21. Meal Coupons

Various employers provide meal coupons like Sodexo or Food cards to their employees.  These aren’t taxable up to Rs 2,600 a month, which helps you save income tax.

22. Medical Bills and Daily Travel Allowance

A Standard Deduction of Rs 40,000 has replaced the erstwhile conveyance allowance & medical reimbursement, and the change in the law has been applicable since FY 2018-19.

23. Car Leased by Employer

Several employers offer car purchase or services to their employees, which can help them save tax and money on several fronts.  However, those who avail of this facility cannot take the benefit of daily travel allowance.

24. Internet or Phone Expenses

Expenses incurred in using the phone and internet devices provided by the employer can be included while filing ITR and can be claimed to reduce income tax.

25. Salary Restructuring

While switching jobs, it is always a great idea to restructure your salary to maximize the take-home pay and minimize the tax outgo. 

How to Do a Balance Transfer? - What is Balance Transfer?

If you have a huge loan or a heavy debt on a credit card that you can't afford to pay off, you could opt for a balance transfer facility. It allows you to transfer a high-interest credit card balance to a new credit card that has a lower interest rate. You might find a few balance transfer cards which offer 0% introductory APR for a limited period.

You can transfer your outstanding balance from multiple credit cards to a balance transfer card. It can streamline all your payments into a single payment, which is much easier to manage.

Steps to Do a Balance Transfer

Read on to know how you can do a balance transfer in 6 steps.

Calculate: Educate yourself on your own credit history before you opt for a balance transfer. Go through your credit balances and APRs. You must pick an appropriate card for balance transfer based on this information. It should have low or no balance transfer fees and the issuer must approve the amount you wish to transfer.

Choose: Once you have done the calculation, you need to find the right card. Options are aplenty. However, you might not be able to transfer your entire debt to a single balance transfer card. Also, you must find one with a low introductory APR. Most balance transfer cards initially offer 0% APR for a limited time. Don't forget to find out how much the fees would be after the introductory offer on APR is over.

Understand: Understanding the terms and conditions before buying the card is of paramount importance. A handful of these balance transfer cards have a balance transfer fee, usually within 3% to 5%. This fee is levied on each balance transfer.

For example, you already have an APR of 12%. The balance transfer card offers an APR of 10%. Over and above that, you have to pay a balance transfer fee of 4%. That doesn't look profitable at all. You won't save anything; on the contrary, you will pay more than before!

Also, check the following:

• Credit limit or amount of balance that can be transferred.
• Duration of the promotional offer of low APR.
• Any restriction on specific types of card or card issuing company.
  

Apply : You can apply for a balance transfer card online. Fill up the form with necessary and correct information. Submit the application form and wait to receive a confirmation of approval.

Transfer: It is better to approach the new credit card company and request a balance transfer. It is a simple process and can be done online or through a phone. Your new credit company will need to know how much of your balance you wish to transfer as well as the account numbers of your old cards. It typically takes seven to ten working days to process the transfer. Continue to make payments on your old cards till the new card company confirms a successful transfer.

Pay :Once the balance transfer is successful, all your old cards will be wiped clean and your entire debt will be transferred to your new card.

If you had a huge debt, transferring the entire amount might not be possible. In that scenario, you still need to make some payments on your old cards.

Try to pay off most of your balance within the introductory period when the APR is low. That's how you must utilize a balance transfer to your advantage - save money on interest and pay off debt faster.

What to Do If You Have a High Credit Balance?

During my initial encounter with credit cards, there was this one time when I was at my wit's end to see the big numbers on my credit card bill. I immediately scanned the detailed expenditure report and wasn't able to find anything odd - grocery, petrol, rent, a few restaurant bills, a bit of shopping here and there - the usual. That's when I realized that I was overspending.

I was a young individual, just starting my adult life. I wasn't particularly wealthy and was running on a tight budget. However, the moment I got a credit card, I developed a tendency to be a spendthrift. The expenditures were the on the same things as before, but much more in amount. I was spending much more than I could afford.

If you are a spendthrift young adult, you might be able to relate to my situation. Most credit card newbies fall into debt as they couldn't don't manage to pay off their balance on time. These tips might help you climb out of the debt if you are dealing with a high credit card balance.

Find the culprit

A high credit balance should be your wake-up call, and you must realize that you are indeed overspending. Maybe you don't yet understand the how credit cards actually work, or maybe the idea of the available 'free money' tempts you to spend a lot.

What initially comes off as a few swipes here and there, might later become a heavy burden on your pocket. It is imperative that you inspect your spendings, find the culprit and tackle it. Here are two of the most common culprits:

Overspending

You are probably sending too much without realizing it. It's a natural tendency for most first-time credit card users - it tempts you to spend more than what you would have spent with cash. Identify those unnecessary spendings and curb them.

Insufficient income

Well, adult life is expensive - rent, electricity, groceries, utility, insurance, fuel, medical bills, phone bill, internet - you need to pay for innumerable things. As a novice, you might not be earning a lot and it's natural to falter at times. You could consider these strategies to plan your finances well.

• try to reduce your bills - go for a lower plan for internet and phone services
• cut down on rent - consider a cheaper accommodation
• avoid eating out at expensive places
• use public transport more than cabs
• try to take up a part-time job or a freelance project if time permits
  

Assess the damage

Don't freak out and run for cover. Never ignore a debt. It could severely damage your credit history and you might a long time to recover from it. Assess the damage, how much ever scary that might be. List your balances, your minimum payment amount and your interest rates for every debt. Get a clear vision of your current standing. Plan accordingly. This will give you a good start. Don't panic.

Act on it

After you note down your credit card balances, interest rates and narrowed down to the cause of debt, it's time for you to take action.

Start paying off the debt. Carrying a large balance can adversely affect your credit utilization rate as well as your credit score. You could follow the 'Debt Avalanche' method and pay a high-interest debt first, followed by a minimum interest on the rest; this helps you save some money.

Or you could opt for the 'Debt Snowball' method wherein you start with paying off the smallest balance amount first while paying the minimum on the remaining balance; this keeps you motivated as you feel that you're steadily progressing on your debt.

If your debt is too much and you are helplessly in need of money, you could consider taking a personal loan or apply for a balance transfer card to help settle a high-interest debt.

Henceforth, develop the habit of not exceeding 30% of your credit limit and pay off the entire balance within the due date of your billing cycle. It will keep you safe and away from possible debts.

What is Repossession? - Repossession and Its Impact on Your Credit Score

What is Repossession?

When you take an auto loan to buy a vehicle and default on the loan, the lender can take back your vehicle with or without your permission. This is known as Repossession. The lender might start the repossession process even when you fail a single payment.

Vehicle repossession laws may vary in different countries, but you should have all the necessary information included in your vehicle purchase contract.

How Can Repossession Damage Your Credit:

Apart from hurting your emotions, a car repossession can also hurt your credit report.

• Late payments: A car repossession followed by a missed payment can reflect on your credit report for up to seven years.
  
  
• Repossession: Following a car repossession, the credit bureaus may include a derogatory remark in your credit report which can stay for seven years. It will also take down your credit score by at least a 100 points.
  
  
• Collections: If you defaulting on your car loan, the lender can hand over your debt to a collections agency. A collections account generally stays on your credit reports for seven years, even after you repay the debt.
  
  
• Court judgments: The lender or the collections agency can sue you if you fail to repay an auto loan. A derogatory remark will certainly be added if the matter reaches the court.

You must also know that each of these derogatory remarks might be recorded as separate entries on your credit report. If your car is repossessed, your credit score can suffer multiple blows from the same incident.

What are the Costs Involved in Repossession?

Along with your credit account, your bank savings account also takes a major blow when your car is repossessed. The procedure itself can cost you a fortune. The lender can take away your car, resell it and ask you to pay the difference amount. This difference amount (financially termed as "deficiency balance") includes the remaining loan balance with its interest, as well as any expenses incurred during repossession.

Let's say you had taken an auto loan and presently owe Rs.10,00,000 to the lender. You fail to repay. The lender hires a tow truck for Rs.5,000 and two men for Rs.2,000 each to get the car back, Rs.1,000 for storage and then auctions the car off at Rs.6,00,000. You will have to pay a deficiency balance of Rs.4,10,000.

How Can You Recover a Repossessed Vehicle?

Getting back your repossessed car is not an easy job. However, there are few ways that you could try.

You could buy back your repossessed car by paying the entire amount you owe. This includes your missed payments with interest, reimbursement of the cost of repossession and also (in most cases) paying off the remaining loan balance in full. Alternatively, you could also buy back your car at the repossession auction.

How to Avoid Repossession?

When you fail to make an auto loan repayment, the lender can take possession of your car at any moment - whether you are at home or at work or amidst a medical emergency. They can take away the car without any prior information or warning. Playing hide-and-seek won't help in such a dire situation. You could try the following ways to solve your problem.

• Communicate: Prevention is better than cure. Before the lender takes a step towards repossession, you should try talking it out. Communicate your situation to the lender - tell them that you are struggling to arrange the money. They might be considerate enough to give you a deferral or restructure the terms of the loan.
  
  
• Sell: Repossession is a complicated and exhausting process. Try your best not to let situations roll into it. If your vehicle's resale value is more than what you owe to the lender, you should sell the vehicle off yourself and settle the debt. It will keep you out of the hassles of repossession.
  
  
• Voluntary surrender: If you can foresee the chance of repossession looming around, it would be better for you to voluntarily surrender the vehicle to the lender before they try to repossess it. It will hurt your credit score anyway, but you could make a good impression for future lenders by showing that you take responsibility for your finances.

How to Repair Your Credit After Repossession?

A repossession will be a serious blow to your credit health. Your credit score will drop significantly; it will leave a derogatory remark on your credit report for the next seven years. To pull yourself out of this mess, you should pay off the remaining loan balance, protect all your other credit accounts and make timely payments to improve your credit score gradually.

Family Vacation - 12 Tips for a Family Vacation on a Budget

Vacations are very much essential for family bonding. They create an ultimate bond between your family members and allow you all to have cherishable experiences. Experiencing different cultures, their native food, scenic locations, etc. is worth the money you spend on a family vacation. However, you need to plan your vacations according to your budget. Here we are, to fill you in with the 12 best tips for a family vacation. Let’s teach you how to travel cheap.

Here are a few tips for a hassle-free and affordable family vacation.

Choose the Destination Wisely

Choosing a destination might be quite confusing. Follow these steps to clear out the confusion and select the destination wisely.

• Fix the budget: Figure out how much money you can spend on the vacation. Else, you would end up getting into debts, which is not a good idea. So, if you are planning a trip on a budget, it is important to calculate your budget in your holiday fund by adding the funds with the amount you save till you leave for the vacation.
• Make a list of the destinations: There can be a lot of destinations suggested by your spouse, children or friends. List all the vacation spots. Think about the type of vacation that you’d want - a laid back beach or a cultural exploration or a vibrant city, and then it becomes easy for you to rule out the places that do not fall under your preference criteria, thus making it easy to plan a trip on a budget.
• Look into the safety risks: Safety must be a priority as you travel with your family. Look out for the government travel warnings and alerts in the area you want to visit. If the area is free from risks such as an accident, burglar or calamity prone area, then you can finalize the destination.

Book Your Flight Tickets in Advance

If you need an affordable family vacation, plan it well in advance; else you might end up spending more on flight tickets. The price of the flights increases with time due to dynamic pricing. Booking early always proved to be the best way to get the cheapest flight tickets. Here's a small tip - use an incognito window while browsing for the tickets. As the flight charges increase based on the cookies in your browser, the price of the particular route that you’re repeatedly searching will tend to increase. You can see the lowest prices in incognito mode. So, if you are concerned about planning a trip on a budget, this is one of the best ways.

Fly Mid-Week

If your travel dates are flexible, then travel in the middle of the workweek. For a visual illustration, go through any major airlines fare calendar. You can see that there is a fall on Tuesday and Wednesday and a spike on Thursday and Friday.

Weigh Your Luggage in Advance

Check with the limit of hand baggage and check-in luggage limit of the airlines. Weigh your luggage well in advance to check the limit. If it exceeds, you are imposed of certain charges. Stay alert and avoid those charges.

Reserve the Hotel in Advance

There are a lot of applications or websites where you can find great deals on hotels. Go through a few neutral sites and compare the price offered by different websites; select the ideal one. Also, you can set price alerts in the app such that you get a notification if the price falls. If you book for the first time, you may also get coupons. You can use those coupons and avail extra discounts to enjoy an affordable family vacation.

Go for a Complete Package

These days, we find a lot of travel agencies that provide packages for vacations. Inquire about some of the trusted agencies regarding packages and select an affordable family vacation package. These packages help you reduce your stress level by booking the hotels, arranging cabs and guiding you during your sight-seeing. These packages can be cost-effective, and you will have an idea on the expenditure beforehand.
Make Refundable Bookings If You Are Uncertain

If you are uncertain about your travel, we suggest that you make bookings that are refundable. However, these refundable bookings are quite costly. The bottom line is that if you’re unsure whether you’ll be able to travel during your original window, go for refundable bookings.

Don't Shop or Eat in the Tourist Area

It is better to shop or eat in the local areas rather than spending a lot of money in the tourist area. The price of mementos and souvenirs in the tourist areas is considerably high when compared to that in the local areas.

Travel Off-Season

The time you choose to travel could also have a tremendous impact on your budget, since prices fluctuate depending on the peak or off season. If you are really planning a trip on a budget, it is wise to head somewhere in the offseason. You can find costs far more economical than at peak times.

Make Overnight City Transits

You have limited vacation time. You lose a lot of time if you travel during the day. Apart from losing time, it is very economical to travel at night, as you can save on accommodation costs. This way, you can ensure an affordable family vacation.

Live on Local Food

Local food is the best option during vacations. You can relish the local flavors and save money by eating at street food stalls and local dhabas. Not only do you get to enjoy the authentic local cuisine, but you would inevitably find cheaper munchies if you are up for local food. Do consider the hygiene factor though.

Keep a Tab on Cell Phone Costs

A vacation is when you devote your time to enjoy the destination with your family. Refrain from talking endlessly on the phone. Remember that you are on roaming - call charges might be quite high. Moreover, all your important work can and should wait until you finish your vacation.

7 Ways of Teaching Kids about Money - Money Management

During our stints of parenting, we all face several difficulties in teaching and discussing different aspects of growth phases with our children. Conversations related to adolescence, career choice, money management, and imparting the values that we want our children to learn are undoubtedly difficult, yet these are the factors that play significant roles in shaping the lives and careers of the kids.

Teaching kids to save money should start from an early age, as you can't accomplish it in a day. However, the biggest question that arises is when would be the right time to teach kids about money? It is apparent that you can't talk about money with your kids before they are six years old as they won't understand; however, don't overthink! Start it as soon as they enter that age bracket. During this age, the grasping power of kids remain high, and they start understanding basic mathematics. But remember that financial literacy can be a boring subject for kids to learn, so you need to adopt a few smart and playful techniques to make them understand the nuances of money management.So here we are with seven easy ways of financial literacy for kids:

Make Financial Literacy Enjoyable

• Since the time your kids start learning maths, teach them practically using coins. Coinciding finance with Math would be an interesting mode of teaching and children will adopt it quickly. It’s a great first step to initiate the learning process. You can also play field games with your kids to give them practical experiences of basic maths that we do in our daily life -- you can act as a shopkeeper, and they can be the buyers.  Explain the simple calculations of addition and subtraction that are required in shopping. After a few sessions of shopping simulation at home, send your child out to face the real world either at a store in your society or at any nearby shopping mart. Ask them to make a list of items that you want, then allocate a certain amount and explicitly instruct them about sticking to the list. To motivate them further, tell them that the amount they will bring back will go into their piggy bank.
  
  
• Take your kids for shopping and tell them what entails in your budget. Talk about the budget crunch and the exclusions; explain to them the reason behind it so that they may understand the significance of setting a budget. This way, they will also understand that their parents have certain limitations on their demands.
  
  
• Start playing board games such as Monopoly, Business Owner, Payday and Career with your kids while they grow up and make them co-relate these games to real-life situations -- being business owners, how can they utilize their money for opening more companies; when does the payday come for an employee and what are the necessary components of the salary; how to make clever financial deals, etc.

Ask Your Kids to Negotiate

The retail sector is getting more and more organized, leaving very little scope for negotiation during purchase. However, if you want your kids to learn to bargain, then send them to bring vegetables or fruits from the street hawkers. Ask them to check the price per kg before buying the items and then teach them to ask for discounts from the vendor on the asking price. It will be the first step towards learning negotiation. As the kids get into the habit of shopping often, they will get a rough idea about the market price of several items, based on which, negotiating with the hawkers for a better deal will become easier for them.

Teach Simple Budgeting to Kids Through Money Apps

You can also use apps like Savings Spree to make financial literacy for kids enjoyable. It also tests the financial knowledge of kids at each level. There is another app called Save! The Game that takes kids through the fantasy world in which they can collect money and avoid impulsive buys in the urge to save more.

Discuss Family Expenditures with Kids

Let your kids know about the significant expenses that you are planning to make. For instance, if you are buying a home, tell them how you are arranging the money through a home loan, the eligibility criteria, the percentage of the amount that you have put in a downpayment and the tenure of the repayment. Here, the purpose is not to put kids under any burden and financial insecurity but to make them realize that their parents are not inherently rich; in fact, they have worked hard to accomplish these life goals. Even if the kids do not understand the technicalities of the loan process, they will surely get a sense of responsibility that is required.

Let the Kids Plan for Family

If you are planning for a vacation, let your kids also know about it in advance. Ask them to make a list of their dream destinations, and the activities they want to include in the package. Then you can keep a piggy bank at home, label it as ‘Family Trip’ and ask your kids to put a certain amount from their monthly pocket money in the piggy bank for the family vacation. Also, inform them that you’ll take care of the remaining expenses. It will give them an exposure to saving money, teach them how to chip in for adventures and entertainment, and they will also rejoice in the feeling of being able to contribute to the family outing.

Teach Savings to Kids Through Money Goals

When you give pocket money to your kids, ask them to save 2% of it initially. After a point, when they accomplish the previous goal, ask them to save 5% and give it to you. You can also associate the savings goal with their unreasonable demands as well. For instance - if your kids are nagging you for something expensive, ask them to save money for it. This step will help them in two ways:

• They will not waste their entire pocket money.
• They will develop a habit to save.
  

It is one of the smart ways to save money by kids.

Allow Your Kids to Make Mistakes

Be prepared for the mistakes that your kids will make while performing the tasks that you have assigned to them. However, don't forget to correct them by explaining. Let’s consider an instance when the kids bargain with the vegetable vendor to such an extent that the vendor refuses to reduce the prices as he/she is not getting any margin. The kids might come back to you, disappointed as they’ve failed to negotiate. In such a scenario, ask them about the problems that they faced while bargaining and explain the reason why the vendor didn't agree to the price. It will help your kids understand the nuances of financial negotiation along with some basic mathematics.

Piggy Bank - Why Should Every Child Have a Piggy Bank?

What do you find most appealing in children? Is it their beauty? Is it their playfulness? Is it their innate humor? Apart from these, the most appealing thing about children is their innocence, their curiosity, and their belief or trust in their parents. Have you ever noticed that your children behave the way you do? You may feel embarrassed by it sometimes, but that is what children do. They try to ape you. They try to be like you. They believe in whatever you say. So, childhood is the time when you must educate your kids about the importance of money, as they believe in that.

Parents are the most important people in the life of children. Teach your children a lot of good habits. A growing family witnesses an increase in expenditure. This is the time you must educate yourself as well as your children on the benefits of saving money. This is where the importance of a piggy bank kicks in.

What is a Piggy Bank?

A piggy bank is not just a storage box for thousands of rupees. It symbolizes the essential habit of saving money. Putting a coin or two in a piggy bank has been fun for most of us in the olden days. However, nowadays parents are taking piggy banks more seriously because they have realized the utility and importance of piggy banks to teach children how to save money.

One of the most effective ways of parenting is teaching your child the value of money. Saving money is an essential skill you need to have in your life. Buying a piggy bank for your kids at an early age and encouraging them to fill it up with money can inculcate great saving habit in your children. Ask your children to drop the coins or currency notes received as blessings from their aunt, uncle, grandparents, etc. into their piggy banks. Even if they are young, start budgeting for your kids. The best thing they can throw into a piggy bank is leftovers.

How Do You Encourage Your Children to Save Money in Piggy Banks?

Piggy banks are fun elements for children. They’re like toys that inherently attract children and hence encourage them to save money as they cannot understand the concept of real banks or savings account. Here is the list of things you must keep in mind while educating your kids about piggy banks.

• Gift your children a piggy bank on their birthday.
• Teach your kids about money and its importance.
• Make it a ritual to fill it with a minimum amount weekly.
• Set some financial goals for your children.
• Give them a target, and if they reach it, gift them with something like a toy, a video game, or increase the amount of the weekly ritual.
• Make a plan on how the money must be spent.
  

The Importance of Piggy Banks

1. Helps in Organizing Loose Change: You might often end up losing all the change under the couch, in your car, or under your pillow when you go for shopping. Piggy bank is a better way to organize this loose change. You can also save the right amount of money which go wasted every time.
   
   
2. Helps in Adding up Money: Setting up goals is one crucial thing you must do for your children. What do children like to buy usually? It can be a bicycle or a video game or a beautiful doll. Make them save every penny to purchase the toy they desire. This would keep them motivated toward the assigned goal. Also, it visually shows your children how close or far they are from achieving the goal.
   
   
3. Motivates You by Setting a Great Example: Piggy banks are effective ways to teach youngsters in the family about the importance of saving money. You might not save an enormous amount, but indeed you end up saving something with which they can buy a new toy or a new video game. This drives the children to save more and more, which benefits them in the near future.
   
   
4. Helps You to Save Always: “A penny saved is a penny earned,” said Benjamin Franklin. Savings must be a top priority for your children. It must become a habit for your children to save money. Tell them the purpose and importance of piggy banks. A piggy bank is just like a foundation for great savings. It’ll surely help inculcate a saving habit in your children.

Why is Financial Literacy Important for Children? - Financial Literacy

If you walk into any school, especially in India, the general emphasis is on three key subjects: English, Maths, and Science. These three subjects are considered to be fundamental in building the academic base and career of a child. However, stressing on particular subjects takes away the focus from other significant skills like speaking, adulting, basic life skills, and financial literacy. The last one is critical as it helps to mold the future of your child. However, before talking about the importance of financial literacy for children, let’s first look at what is meant by financial education.

What is Financial Literacy?

Financial education is the confluence of economic, credit and debt management, to make a financially informed decision that is integral to our everyday lives. Financial literacy in India includes the basic understanding of how to manage money, how a bank works, how to create a bank account, what is a credit card and how to avoid debt. In a nutshell, financial education helps us in making responsible, informed decisions that would have an immediate impact on our daily life.

The lack of financial literacy in India is prevalent all across the country. The problem is just not limited to emerging or developing countries irrespective of the class or landscape. The basic understanding of how to manage financial risks effectively and avoiding financial pitfalls can come in handy, and this needs to start early in life. Let's look at why understanding the importance of financial literacy is the need of the hour and should be instilled in every child.

Importance of Financial Literacy among Children

The lack of financial illiteracy can cost you heavily, and various factors also make financial decision-making a lot more difficult than ever. Five trends that are converging to demonstrate the importance of financial literacy guide are:

Lack of Confidence to Take a Firm Financial Decision

Consumers are now believed to be shouldering their financial decisions, and that is unsafe. Earlier, the past generations depended on pension plans to fund the rest of their retirement lives. However, the scene has completely changed as pensions are more of a rarity now than a norm, especially for the new generation. So, the lack of financial education can prove to be detrimental.

Complex Choices

As consumers, we are perpetually stuck in the horns of a dilemma on what to choose among various investment and savings schemes. All these plans offer varying interest rates and maturity benefits, and it needs a significant amount of financial literacy, to take the right decision. Moreover, such decisions can always impact your ability to buy a home, finance an education, or save for retirement and much more.

Longer Life Spans

With the advent of medical knowledge, we are living longer and better, which means that we need more money after retirement than what the prior generations did.

Changing Environment

The ever-changing financial landscape is very dynamic, as anything can influence you. Taken together, these factors can cause conflicting views and difficulty in creating, implementing and following a financial roadmap.

Spoilt with Choices

Banks, brokerage firms, insurance firms, credit card companies, mortgage companies, financial planners and other financial service companies are all vying for assets, creating confusion for the consumer.
How Can You Help Your Child by Building Financial Literacy in India?

Budgeting Skills

Although various factors such as income, social norms, and other behavioral biases influence people‘s expenditure, budgeting skills can save the day. Teaching your kid on how to budget from a very early age imparts a sense of financial awareness and responsibility to them.

Encourage Them to Save

Most of the people in India are unaware of how to save. Besides, they spend all, or most, of the money they earn each month on various consumer goods. There is a substantial societal and cultural pressure, including recurring advertising and discounts by companies, that have significantly contributed to the spending habits of Indians. Encouraging your kids to save each penny will help them understand finance. Setting goals that your kid's desire, giving pocket money for chores, and asking them to write down their expenditure can promote good saving habits and also help spread financial literacy in India.

Monetary Independence

Most of the Indian youth fail to understand the very aspect of independence as they are dependent on their parents at least until they are 24 years of age. Ensuring financial independence for your child is crucial as it will prepare them for today's cut-throat world. Teaching them about the basics of debit over credit will provide a sound financial grounding later in their life and also offer a robust financial literacy guide.

Prepaid Travel Cards - Using Forex Cards for Travel

Traveling abroad is no big deal anymore. However, that doesn’t make a foreign destination any less of an excitement! The stark difference in culture, food, and language elevates the experience to another dimension. Nevertheless, there is a lot more that one encounters while traveling to a foreign country other than the language and food. One such critical aspect is the rattling difference in currency across nations.

Currency conversion is not as simple as you might think. It's not as if you can walk in and exchange dollars instead of your INR's. Before you start packing for your vacation, it is essential to understand foreign currency and how to deal with it. If you are not careful enough about currency conversion, it can turn out to be a point of bother, which is why you should commit enough time to research on the topic.

A basic knowledge of the conversion rates, service charges, and other fees involved in the process will definitely help you to relieve a lot of stress and enjoy the place more.

Although cash may seem like a good enough option, but it has its own set of cons. With the advancement in technology, the world is now running on plastic money, and thus, there are limitless options to carry cash to a foreign country.

However, it is important that your cards are accepted over at your destination. That’s why you should take up prepaid forex cards while traveling abroad, as they are really suitable for this very purpose. First, let’s take a look at the different types of cards made available for travelers:

Travel Credit Cards

These cards are especially built to suit your traveling needs. These cards come with several benefits, which allows you to make purchases and payments at retail stores, restaurants, or anywhere else while traveling. Besides, most of these travel credit cards offer bonus points for booking flights and hotels. Apart from that, the more you spend, the more reward points you earn; you can reap their benefits by redeeming them later.

Forex Travel Cards

Prepaid travel cards like Forex travel cards can be loaded with multiple currencies, and you can avoid paying additional conversion charges. These travel cards are readily available and provide better exchange rates that do not fluctuate once money is loaded on the forex card. These cards are safer as well as cheaper in terms of conversion rates and charges.

Forex travel cards have many advantages over cash, credit cards, debit cards or traveler's cheques. They offer better exchange rates for loading currencies than you would get on buying foreign currency as cash. Moreover, it also gets easy for the banks to provide forex cards, as it is a cheaper option. Here are the many benefits that you can avail by using forex travel cards:

• No Effect of Fluctuations - Forex cards loaded with foreign currency are immune to the fluctuations in the currency value, as the amount is added at locked-in exchange rates. So, for instance, if you have USD 1000 on your forex card, the value in the card will stay USD 1000 irrespective of fluctuations in the INR-USD exchange rate.  
  
  
• Forex for Safety - Safety is always a concern, and forex travel cards guarantee your financial security. Forex cards come enabled with chip and PIN technology for safeguarding the money in them, making it a way better option than carrying cash. Besides, you can block the card and freeze the balance in case the card gets lost or stolen. Moreover, once a secondary forex card is issued, the funds can readily be transferred to it.  
  
  
• Multi-Currency Cards - What if you have to visit two different countries with different currencies? It would be insane if one decided to carry cash, as they will surely lose out a lot of money in exchange rates. That's where forex cards act as your savior. Prepaid forex travel cards allow you to carry multiple foreign currencies at the same time in a single card. For instance, Axis Bank forex travel cards enable you to load up to 16 popular currencies such as Denmark Krone (DKK), Australian Dollars (AUD), Hong Kong Dollars (HKD), Euro (EUR), Japanese Yen (JPY), etc.
   
• No Exchange Rates - Exorbitant exchange rates are levied on the use of debit or credit cards, whereas the prepaid forex cards have no additional charges when you swipe it at PoS counters abroad. The rates otherwise are incredibly high, and would cost you around 5-11% extra of the total transaction charges!
     
  
• No Dynamic Currency Conversion Fee - The Dynamic Currency Conversion (DCC) fee is not applicable on forex cards, as they are already loaded with the local currency of a foreign country. However, if you are using a debit card or credit card for a transaction, then DCC would add an extra 3-5% charge on your transaction cost.
  
  
• Universal Recognition - Forex travel cards are universally recognized and accepted, unlike outdated traveller's cheques.
  
  
• Withdrawing Cash -  Forex cards can be used to withdraw money from any nearby ATM, as opposed to encashing traveler's cheques, which would put you through the trouble of finding establishments willing to accept it. Besides, you can even use forex cards for online transactions through e-commerce platforms abroad.

Multiple Bank Accounts - 8 Benefits of Opening Multiple Bank Accounts

Nowadays, many people are opening multiple bank accounts due to various reasons, be it a job switch or for business purposes. However, the fundamental benefits of having multiple savings accounts are still in question. So, let's delve deep into the matter and discover some of the advantages that opening multiple bank accounts can have.

Save Money for Various Short-Term Goals

Often, when all you have is a salary account, it gets difficult to actually save money. Having an additional account can be of real help in this regard.  You can assign a goal to each account that you have and deposit money in them accordingly. Let’s discuss this with an instance - Say you are a travel enthusiast and wish to go on a foreign trip every year. So, you can open an account dedicated to that purpose and save a certain amount of money in it every month. Multiple bank accounts can thus help you save money diligently for short-term goals; however, make sure that you use the second account only for storing money, and keep yourself from withdrawing it unless entirely unavoidable.

Open Multiple Need-Based Accounts to Track Your Money

Nowadays, the government offers several services to different sections of people, under which you could get a subsidy in your account. For example - Under the Direct Benefit Transfer (DBT) scheme, the government transfers money as subsidies for LPG gas directly into your savings bank account if you come under a certain bracket, and there are around 400 more such schemes. Hence, it is beneficial to have a separate account for these subsidies. Likewise, you can have a separate account linked with your income tax returns, where you can receive refunds as and when applicable for you. If you are a pensioner, then it is better if you receive your pension in a dedicated account, as it makes tracking the funds easy.

Thus, it can be advantageous for you to maintain multiple bank accounts based on your different needs.

Keep Your Options Open

Having multiple bank accounts could also help you get through certain unforeseen circumstances. In case you face technical difficulties during a transaction from one of your bank accounts, you can always fall back on another account of yours to get it done. This can prove to be helpful especially in case of emergencies, and you will not be left without any options when you hit an unexpected roadblock.

Create an Emergency Fund

Dedicate an account exclusively to saving for an emergency. At the start of every month, transfer a specific amount of money to this account through a standing instruction to your salary account. An emergency fund will help you sail through tough times by providing you with a financial cushion at times of need.

Avail Different Perks from Multiple Banks

Different banks in India offer distinct interest rates and perks. Having multiple bank accounts gives you access to the best of such benefits. Holding a savings account in one bank and maintaining a good relationship with it could help you in availing a home loan with relative ease. Whereas, some other banks may offer higher interest rates on savings accounts. You may be eligible for rewards, exclusive facilities, and bonuses at other banks. Thus, the sheer variety of benefits offered by different banks makes it a good idea for you to hold accounts in many of them.

Avoid ATM Transaction Charges

Banks allow five free transactions from their own ATMs and three from ATMs of other banks. After these eight transactions, the bank starts charging you if you use an ATM with the same debit card. However, if you hold debit cards of two bank accounts, then, you can make up to 16 free transactions in a month.  

Avail Free Cheque Books

Usually, a bank offers only one free checkbook in a year. If you request for another checkbook in that financial year, the bank will charge you. However, If you have two bank accounts, then you can avail of two free checkbooks in a year.

Increase Your Credit Card Limit

Nowadays, banks often offer a credit card when you open an account with them. So, if you have two different bank accounts and credit cards issued from both of them, then the amount of credit that you can use will increase.

Business Credit Cards - Know About Business Credit Cards

Hi there! As you have come across this page, I’m assuming you might be a business owner / sole proprietor who is collating information regarding a business credit card. There must be several questions crossing your mind right now:

Why should I buy it?

What points should I keep in mind while purchasing it?

What are the best practices for a business card user?

Which are the top business cards in the market?

Well, mymoneykarma is here to answer all your questions one by one. Let's begin.
Why Should You Get a Business Credit Card?

Segregate Business from Personal Expenses

Consider a situation where you are the founder of your start-up, and you make all of your payments, whether personal or official, through regular credit cards. Wouldn't the process of tracking both the expenses be cumbersome?

Hence, to keep your accounts separate; it's better to get a business credit card.

Get Perks and Rewards

When you spend an enormous amount on shopping for business essentials, then why not reap the benefits? Here are the perks that the credit issuers provide to their customers:

• Reward points
• Welcome bonus
• Complimentary access to airport lounges - domestic and international
• Priority pass membership
• Dining, shopping, and movie vouchers
• Discounts on hotel and flight bookings
  

Access Short-Term Loans

When you start a business, at least initially, the income remains inconsistent. During that time, you may need money to meet the overhead expenses, vendor bills, etc. Overlooking them would definitely jeopardize the flow of business operations. At such a juncture, a business credit card can provide you access to a short-term loan until the next payment comes into your account.

Build Your Business Credit

A business credit card helps you in establishing your business credit profile.

The business credit rating is like a personal credit score; the only difference is that it is formed based on the financial activities of the business as a whole.

If it is low or average, it impacts your ability to get qualified for a business loan at a low interest rate.

Points to Keep in Mind While Getting a Business Credit Card

Compare the costs, annual fees, and interest rates of various business cards before finalizing your choice. Track your business expenditure first to find the right kind of credit card.

If you need to travel overseas for work, check the global acceptance of the card as well. Also, ensure that the business card you choose reports credit activities to the bureaus.

What are the Best Practices for a Business Credit Card User?

Pay on Time

Now, this goes without saying. Pay off your dues on time to avoid paying late payment fees. Also, try to pay more than the minimum due amount so that you don't have to pay a high APR or annual percentage rate (APR is the interest that accrues when you don't clear the entire balance.) A delayed or missed payment can harm your business credit score significantly.

Purchase Only Business Essentials

Don't use your business card to pay for personal expenses such as flight or hotel bookings for vacations, as it would make your financial management process cumbersome. Remember that one of the uses of a business card is to separate your personal and business lives in the first place.

Monitor Your Credit Report

Keep a tab on your credit score once you start using the card. Any slump in the rating can affect your future credit applications. In case you observe any errors in your credit report, inform the lender immediately.

Keep Credit Utilization Low

Though the credit limit on business cards is generally quite high, you need to take care of the credit utilization ratio, which should ideally be below 30%.

Going beyond this percent can push you into a debt trap, as you may find it hard to pay on time.

Top Business Credit Cards

Kotak Mahindra and American Express have numerous variants of corporate and business cards, which offer substantial perks and rewards. Here are some of them:

• Kotak Mahindra
• Corporate Wealth Signature Card
• Corporate Platinum Credit Card
• Corporate Gold Credit Card
• American Express
• American Express Corporate Card (Gold)
• American Express Corporate Meeting Card
• American Express Corporate Purchasing
• American Express Corporate Card (Green)