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How to Save Money by Using a Credit Card

Updated on November 24, 2017
Thish profile image

Thish holds a degree in Information Technology and also a Master in Business Administration. She loves traveling & share her best tips.

Credit Card Concept

Credit card concept is a way of buying goods and services on loan and is designed to let the banks earn on the interest and other fees levied on the credit card and its transactions.

People get credit cards as it gives higher credit limit maximizing their cash potential that they can spend.

Credit cards offered by banks
Credit cards offered by banks | Source

How Banks Earn from Credit Cards?

Most people do not understand that the credit limit on a credit card is a credit/loan. Therefore until the next credit card bill comes they happily spent on the credit card as well as their salary.

So when the next bill comes, since they do not have enough money to settle the debt, they only pay the interest which the banks want you to do. So over time if you are a good customer to the bank which means you continue to pay the interest and not the capital, the bank will automatically increase your credit limit and in turn ignorant users will use this new limit as well and start paying higher interest; making the banks richer.


What to Consider When Getting a Credit Card

Now lets see what you must consider when getting and using a credit card.

Three bank charges are involved in any credit card. They are;

  1. Joining fee
  2. Annual fee
  3. Interest

Joining fee is charged when you first apply for a credit card and gets one. Annual fee is charged every year as a membership. Interest is charged on the outstanding credit on the card.

Different banks have different fees and interest percentages. Therefore to save money on credit cards you must check few banks and pick a bank that is beneficial.

Reduce Charges by Having Supplementary Credit Cards

If you or your spouse or partner(s) considering getting separate credit cards, you can actually get a supplementary card on an existing credit card than getting a separate card.

Supplementary credit card generally has less joining fee and annual fee and share the same credit limit with primary card.

Using credit card to buy goods
Using credit card to buy goods

How frequently you use credit cards

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Interest Charged on Credit Cards

With regard to interest charged, different banks have different rules in calculating the interest.

For example HSBC bank in Sri Lanka charges the interest on the full amount of a billing cycle if you do not pay the full amount outstanding on the payment.

Thus, even if you don’t pay one Sri Lankan rupee on the balance you get the full interest charged. Therefore be careful as different banks charging differently.

But most other banks at least for now charges only on the outstanding amount after payments.

Use discounts and offers wisely. Not all the discounts are real.
Use discounts and offers wisely. Not all the discounts are real.
Buy the needs over wants. Do not misuse credit cards
Buy the needs over wants. Do not misuse credit cards

Credit Card Usage on Needs Versus Wants

Finally use the credit card to buy items (that you need) that has special promotions or discounts if bought through a credit card.

You can subscribe to their credit cards offers newsletter. Such that you will get to know the sales, offers, discounts well in advance.

This way you reduce the total expenses.

When you travel, it is better to use credit cards as you get a better exchange rate and also you get reward miles from airliners.

But please keep in mind not to buy something you do not want to buy just because the credit card gives you a discount.

Practice Good Payment Habits

You can avoid unnecessary charges if you practice good payment habits.

That needs good monitoring of your finances and take actions on them on timely basis.

Such that banks cannot charge you unnecessarily and you will not be trapped with some hidden charges they could put on your bill which sometimes are not clear to us.

The easiest fees to avoid is the interest and the late payment fee. This is totally under your control. Simply make sure you pay the bill in full (not the minimum payment or not anything lower than the billed amount) exactly on the payment due date or few days before the due date.

Having a credit card in your wallet does not make you pay money to the bank. Its your financial discipline or lack of it that will make you waste money. If you use the credit card wisely you can actually save money and make money out of it than not using a credit card.


  • What to do if you lose your credit card; Inform the bank immediately that you have lost the credit card.
  • Even when you are abroad still call your local bank and make them aware, such that a thief cannot use your credit card and saves you not having to pay someone else's bill.
  • Ensure you have your security question verification is enabled for online purchases(ex: buying through Amazon, ebay) and the security question is not something that can be easily guess by the hackers or thieves.
  • Almost all banks nowadays has rewards programs for their credit cards. They also provide discounts promotions against the rewards points. Make it a point to always be a part of this rewards program.


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    • profile image

      CC user 3 years ago

      thanks for the tips, banks will not like this post but we general public like it.

    • Thish profile image

      Ohla 3 years ago

      Thanks Dish for your comments and adding 2 other important things to consider while choosing a credit card. I understand those 2 points are very valid and some thing that i also thought about when shifting fro my previous Credit card to my current credit card. However i have missed adding those 2 points in the article and thanks a bunch for the reminding and adding value!!

    • profile image

      Dish 3 years ago

      Very informative article. Thanks for sharing!

      Here are the two additional things I consider while choosing a Credit

      Card these days :

      1. Late payment fees

      2. Types of promotions the card provides

      Although the latter varies time to time. But I consider whether those promotions are affordable to me at least.

    • Thish profile image

      Ohla 3 years ago

      Thanks Duncan for stopping by to put your thoughts. Banks will show you lot of love to make their profit margins higher. We should be controlled not to be trap of them. Nice to hear that this was an eye opener.

    • profile image

      Scotty Duncan 3 years ago

      I always questions my self how banks make profits from credit cards. I thought its mainly form merchants by keeping money with them but never really thought on the points in this article. Great stuff. A real eye opener.