Concept of effective fee - The only fee you should consider while applying credit cards

[Nocash]

EFFECTIVE FEE 🧵 Here is the concept of "effective fee" - Only fee to be considered for credit card applications ❇️
Disclaimer : This thread requires a little bit more focus so do read it with 100% attention ⏳
There is a sheet for reference too 🙊 Let's go 🏃

(2/n) Let's first understand 4 Types of credit cards based on fee. 1️⃣ LTF (Life time free) Joining fee - 0 Renewal fee - 0 Nil battey sannata Everyone's favorite 😉 Apply whenever you need it No calculation required except for overall increase in exposure.

(3/n) 2️⃣ FYF (First year free) Joining fee - 0 Renewal fee - Chargeable Again easy choice 🆗 Apply and then experience the benefits in person 🤞 Calculate effective fee and if not beneficial enough, don't renew it after 1st year.

(4/n) 3️⃣ SYF (Subsequent years free) Joining fee - Chargeable Renewal fee - 0 Courtesy: IndusInd cards 😀 You have to calculate effective fee & compare with benefits while applying because a) future is uncertain ❓ b) devaluation can happen anytime 🙊

(5/n) 4️⃣ Chargeable cards Joining fee - Chargeable Renewal fee - Chargeable Here you have to calculate effective fee at joining as well as on renewal 🎯 Now let's understand the concept 👇

(6/n) Effective fee = Fee charged - Most conservative worth of Gift vouchers and points Some examples to understand it 👇 a) Axis Airtel Joining fee is 590 but you get 500 amazon GV I will discount it @ 10% (conservatively) So effective fee for 1st year is 590 - 450 = 140

(7/n) b) SC ultimate Joining fee and renewal fee is 5900 but you get 6000 points and 5000 points (on paper at least) Points can be used to buy 6000/5000 GV of Croma and others I will discount it also @ 10% (conservatively) Hence, Effective fee for first and subsequent years is 500 and 1400 (5900-5400/4500) respectively.

(8/n) Why you are considering GV only ? Because it has an inherent value by default (even though it pushes you to buy something) ✴️ You may not play golf, watch movies or use lounge access but you can't deny purchasing goods. That is what everyone does each and every month.

(9/n) So you are ignoring great dining, travel and movie offers ? ✅ Yes for calculating effective fee i.e. cost of holding credit card. 🗨️ But they will be considered under benefits of holding credit card. This segregation of cost v/s benefits makes decision making easier ✨

(10/n) Compare Axis magnus card with 10000 + GST fee v/s Axis magnus card with 3800 effective fee Which one is more simpler for you to compare with benefits and find out whether you should apply for this card or not ? Check this sheet for reference👇

Credit card decision making tool

docs.google.com

Now let's discuss
The forum is open for you to shoot your thoughts/opinions or general discussions around it.

 

[bugmenot]

Your article is good and valid, worth reading. But personal opinion, those emojis distracting whole content.

Not sure if @Nocash is Kashif or not but the content is direct copy of his tweet.

 

[Nocash]

Hehe
Thanks
It is because I copied it from Twitter.

Next time I will take care of that.

Regarding Magnus, you get tata cliq voucher.
Less use case ~ More discounting. I discounted it @ 20%

 

[Copycat]

Shouldn't you also consider the opportunity cost when making a decision? i.e. you can get better rewards by using your other cards.

 

[Nocash]

Not sure if @Nocash is Kashif or not but the content is direct copy of his tweet.

It is me only.

And the philosophy is to use “no cash” when you get rewards on cards.

 

[Nocash]

Shouldn't you also consider the opportunity cost when making a decision? i.e. you can get better rewards by using your other cards.

Yes,
That is what I alway say on space.

For me, If don’t value Magnus 500 discount on movies to be worth 500 as even a basic debit card could also given me 200/250.

I only consider the incremental changes. But including all those would have made the sheet complex.

So eazy one first which creates interest and then uplift the audience.