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Old 11th February 2008, 16:25   #16
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Originally Posted by DCEite View Post
I have figured out a smart way of using CC.
Step 1- Get a free for life CC. For eg., if you are an ICICI savings acc holder, you will be offered at least a Titanium card which is lifetime free and no fuel surcharge at any petrol pump.
Step 2- Pay using CC when you can pay by cash. For example, petrol/diesel fillups, mobile/internet bills etc etc.
Step 3- Make a rough estimate of your expenses beforehand, and invest that amount at the beginning of the month in some Debt/Liquid fund (which has zero entry and exit loads, and can be done in a jiffy using ICICIdirect etc).
Supposing i know that i am going to spend roughly 10k on my expenses on CC, then invest 10 k in a liquid fund.
Step 4- When the CC statement comes, redeem your debt fund 3-4 days before the due date of CC payment, and pay the amount before due date.

This way, you not only gain reward points (which you can use to purchase/get free useful stuff), you also pay less (the interest you earn on debt fund for 1 month).

Hows that?
Quite an innovative use of debt/liquid funds! I used it only to earn a bit extra return over savings bank interest rates! Never thought these could be used to 'maximize-bang-for-your-credit-card-buck' as well.

I am wondering if it is worth all the extra effort, considering that one might hold multiple cards with different billing cycles and spends? Would you consider investing in multiple debt/liquid funds for each of the cards?

Also, as a logical investor, wouldn't you consider screening all best performing short term funds before making your investment? As we all know, there is no one consistently best performing fund on a MoM/QoQ/YoY basis. So does this mean that you end up screening ALL liquid funds every month? Sounds confusing and cumbersome to me!
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Old 11th February 2008, 16:30   #17
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the maximum yield on debit fund open ended( all debit funds including gilts ) the last one month is 3.59% PA. next highest is around 3% PA

only debit short term is 1.2% some thing

source: valueresearchonline

Savings bank rate is 3.5% no hassles at all

savings bank rate is calculated on the minimum balance between 10th to 30th /31st every month.

generally speaking debit/gilt funds yield less in a market where interest rates are raising and more when Interest rates are falling.

as of now we are in a period where interest rates are raising.

better alternative will be to opt for the bank FD linked to savings a/c where above a certain limit balance will be shifted to a FD of chosen duration.
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Old 11th February 2008, 16:46   #18
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the maximum yield on debit fund open ended( all debit funds including gilts ) the last one month is 3.59% PA. next highest is around 3% PA

only debit short term is 1.2% some thing
I don't know where you saw that. That's the per month yield you saw. Some of these funds have made a killing due to the volatility in the bond market. Annualize that number and you will be startled with the results.

Click on the link below:

Fund Compare - Value Research Online

As of today, 17 out of 22 short term debt funds have a 1-year return og 7.84% or higher.

For liquid funds, check the link below:

Fund Compare - Value Research Online

An overwhelming majority has returned in excess of 7.50% per annum.

Quote:
Originally Posted by rkg View Post
as of now we are in a period where interest rates are raising.

better alternative will be to opt for the bank FD linked to savings a/c where above a certain limit balance will be shifted to a FD of chosen duration.
I again do not understand your assessment. Over the last few days, we have seen almost all banks in India cut interest rates. Forget the US and Europe, they have cut rates like crazy, especially the US Fed.

Last edited by nkapoor777 : 11th February 2008 at 16:48.
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Old 11th February 2008, 16:49   #19
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Originally Posted by Sam Kapasi View Post
I'm no finance person at all (but a serious CC user, hardcore, lol)
By simple logic, if I was to invest Rs. 10K for 15 days at 12pcpa I should get Rs.50/- in 15 days.

I just read that whole thing below. If I spend Rs. 2.4 lacs a year on my card, I can gain Rs.700/- a year by investing and reinvesting and doing all this bank jhanjhat.

I cannot do it for Rs. 700/- a year.
Exactly Sam. Its too much jhanjhat for too small a money. On top of that it unnecessarily builds up fund movement in your account which are nowadays being reported in the AIR sent by the banks if there are too many movements, even if they happen to be chillar money.

Also, there is a small hitch in the theory. Let me explain how.

It all sounds theoritically fantastic but then govt gilts and other secured debt market funds (the whole point is assurance of the money being there when the bill is generated and hence the author should make these choices) do not give very high returns. The ones which are most secured typically give around 1-2% return for the whole of 1 year (yes thats true, you can check that out for yourself). And you commit for the year.

The ones which give around 6-7% pa (i.e. on the higher side) are run by private organizations. However they again are not PO deposits with any assured returns. Some months have a high and some have their lows. Yes, thats true! So there is no assured returns. In typical 'not-so-happening' months return for a whole of 1 month falls as low as 0.2% or even lower. And in real bad months the returns get to the negative territory also.

The biggest blockade in the above funds here (the 6% ones) as I see it is that they are not assured. That then hardly leaves any charm in them. I might as well dabble in stocks and fetch even higher returns in the good months. That ways at least even when the tidings are not good I will still be able to leave off the extra earnings that I made in the good months. But then that was not the purpose to begin with, was it?
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Old 11th February 2008, 16:51   #20
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Originally Posted by nishantgandhi View Post
Also, as a logical investor, wouldn't you consider screening all best performing short term funds before making your investment? As we all know, there is no one consistently best performing fund on a MoM/QoQ/YoY basis. So does this mean that you end up screening ALL liquid funds every month? Sounds confusing and cumbersome to me!
If you follow the bond markets, you would have identified a few very efficient war horses over the last couple of years. The least I have ever got was something like 6.00% annualized yield in a bad month. It's your money mate, you gotta pull out all the stops to make your money work harder for you.
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Old 11th February 2008, 16:58   #21
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@Zappo: Liquid funds run by reputed fund houses only invest in AAA or other comparably rated securities (most of thier corpus at least, if not all).

If you want to be cynical, there is no assurance of anything in this world. Look at the deficit on which US is sitting. If US blew up, can you imagine what the repurcussions will be? But, the old adage comes into play here - "Too big to fail". If you are big enough to sink everything else with you when you go down, the chances are you would never be allowed to sink, by hook or by crook. And that's what will keep the world economy going; barring a few short blips here and there.
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Old 11th February 2008, 17:03   #22
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Originally Posted by nkapoor777 View Post
I don't know where you saw that. That's the per month yield you saw. Some of these funds have made a killing due to the volatility in the bond market. Annualize that number and you will be startled with the results.

An overwhelming majority has returned in excess of 7.50% per annum.
I do not know what you are trying to prove! I can show you funds which give even better annualized returns. So? Is that the point here? The whole idea is to invest the money in a secured way for just 12-15 days till the bill is generated to get "the maximum bangs for your buck" as you said.

What are you then looking at the annualized returns for? Secondly, even if you consider the first link you provided and take the most safe bet in that chart it is Birla Short Term Growth fund. Remember, they are also equity based. So no guarantees. Already you have moved away from the premise of safe harbor for your money till you pay off.

Now Birla is comparatively safer as it is rated as low risk, high return. So what did it return in last 1 month? 0.66%. Now take the following into account.
1. You typically will get 12-15 days to dilute your holding. Now you can figure out the returns for yourself.
2. You would have paid an entry load to enter.

You know now, why your argument is sounding naive, don't you?

I would say just one thing for everyone. Credit Card spendings is one thing and investments is another, people. Do not mix the two and do not try to cross-subsidize one with the other. That is a path to danger. All esoteric ideas only look good on paper (and message boards) only. Beyond that it is only your financial prudence that can save you.
************************


EDIT: By the time I posted it I see that you have already posted another message. Well, hold it awhile mate. Lets get a few things clear here. We started off on a simple premise here. The author of the post (that started the debate) was simply sounding off an idea. It was whether we can not use the short term secured money/debt market to park the money for the 12-15 days in-between the spending and the credit card bill generation. It was a laudable idea but had some problems in terms of feasibility.

However since then you seemed to have jumped to equities, their annualized returns and even to the US economy and its performance! Please... read the simple basic premise of the post first. If the investment and their annualized returns were to be the only criteria I am sure the readers here will know better return avenues than even what you are quoting.

Last edited by Zappo : 11th February 2008 at 17:13.
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Old 11th February 2008, 17:09   #23
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Go for 30 day FD, safest bet
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Old 11th February 2008, 17:10   #24
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Originally Posted by tsk1979 View Post
Go for 30 day FD, safest bet
And co-ordinate maturity with the expected date of your CC payment? Wow.
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Old 11th February 2008, 17:17   #25
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Quote:
Originally Posted by Zappo View Post
I do not know what you are trying to prove! I can show you funds which give even better annualized returns. So? Is that the point here? The whole idea is to invest the money in a secured way for just 12-15 days till the bill is generated to get "the maximum bangs for your buck" as you said.

What are you then looking at the annualized returns for? Secondly, even if you consider the first link you provided and take the most safe bet in that chart it is Birla Short Term Growth fund. Remember, they are also equity based. So no guarantees. Already you have moved away from the premise of safe harbor for your money till you pay off.

Now Birla is comparatively safer as it is rated as low risk, high return. So what did it return in last 1 month? 0.66%. Now take the following into account.
1. You typically will get 12-15 days to dilute your holding. Now you can figure out the returns for yourself.
2. You would have paid an entry load to enter.

You know now, why your argument is sounding naive, don't you?

I would say just one thing for everyone. Credit Card spendings is one thing and investments is another, people. Do not mix the two and do not try to cross-subsidize one with the other. That is a path to danger. All esoteric ideas only look good on paper (and message boards) only. Beyond that it is only your financial prudence that can save you.
Cool, I'll answer your queries one by one.

First, safety of investment - Click the link below:

Birla Sun Life Short-term-G - Fund Portfolio - Value Research Online

Average Credit Rating of Portfolio Holdings: AAA (doesn't get any safer than that).

Second, the fund in quetion does not hold any equity or equity-linked instrument. See the Asset Allocation on the same page in the link above. heck, its mandate does not allow it to deviate towards an iota of equity.

Third, 0.66% per month equates to 7.92% per annum, exactly what I have been trying to say all through.

Fourth, Entry load is NIL in the fund in question, but there is an exit load of 0.25% for redemption with in 15 days. You hold on till the 16th day, no worries at all on this front. See the link below:

Birla Sun Life Short-term-G - Fund Details - Value Research Online

Peace brother!

Why are we at it for virtually nothing? I am sitting at home due to viral fever. Thanks for keeping me engaged brother. I was feeling so bored with nothing to do. To each his own!! You keep things simple and keep paying your bills; I'll simply keep enjoying the extra return I get on the float every month.

Last edited by nkapoor777 : 11th February 2008 at 17:26.
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Old 11th February 2008, 17:29   #26
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Originally Posted by nkapoor777 View Post
It's your money mate, you gotta pull out all the stops to make your money work harder for you.
This is the whole point.

Besides, it only takes 5 mins to 'invest' in a debt/liquid fund through online brokerage like ICICIdirect etc. Best thing is there is NO entry/exit load for some top performing funds (like ICICI prudential liquid plan).

Last edited by DCEite : 11th February 2008 at 17:30.
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Old 11th February 2008, 17:37   #27
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for just 12-15 days till the bill is generated to get "the maximum bangs for your buck" as you said.
Why 12-15 days. Generally the due date is 30 days from the date of purchase.
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Old 11th February 2008, 17:45   #28
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Why 12-15 days. Generally the due date is 30 days from the date of purchase.
Or, if you are smart enough and time your purchases, it could be as far as 52 days, no less. My card spends normally happen in the first week following the bill generation date, which means I can enjoy a free credit period of anything between 42-52 days.

And what all this means is that you get a few thousand rupees worth of goodies or shopping vouchers every year apart from all the interest on the float invested in the funds. believe me, it does total up to a decent chunk of moolah! If you could do it easily, would you mind the freebies? I don't.

Last edited by nkapoor777 : 11th February 2008 at 17:50.
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Old 11th February 2008, 17:55   #29
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i've had the same problem with HSBC Bank Credit Cards in Mumbai
Was promised Lifetime free card at the time of application.
The only way to get this problem sorted is go to your nearest HSBC Bank branch and sort it out amicably with a bank executive.
What we don't realise is that they bill annual membership charges and when we dont pay that they keep billing late charges and interest.
Eventually, they round off the overall outstanding balance to zero. . .but they report the card holder to the Credit Bureau, hence the next time that you apply for a credit card or a loan the chances of it getting approved are much lesser.
Overall your long term credit history gets adversely affected.
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Old 11th February 2008, 18:20   #30
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Originally Posted by Zappo View Post
Secondly, even if you consider the first link you provided and take the most safe bet in that chart it is Birla Short Term Growth fund. Remember, they are also equity based. So no guarantees. Already you have moved away from the premise of safe harbor for your money till you pay off.
As Nkapoor mentioned, Debt funds as the name says invest in debt and money market instruments. As you can see in this link:
Birla Sun Life Short-term-G - Fund Analysis - Value Research Online

Stated Asset Allocation
Min Max
Equity 0 0
Debt 0 100
Others 0 100


True, nothing is risk free. Even 100% debt fund. But the world is not perfect, heck even a bank account is not 100% safe.

Last edited by DCEite : 11th February 2008 at 18:30.
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