Credit card jugaad: Sharing can max out rewards however has dangers

How do bank card customers earn extra rewards that may get them free enterprise class flight tickets and stays at luxurious inns?

Banks sometimes reward customers for all bank card transactions. And, extra the transactions, extra the rewards. But, how do folks make extra transactions if that’s past their means? Credit card nerds discovered a means out: Transact on behalf of different people as nicely.

Credit card holders usually get a reduction on purchases that others don’t. Prospective patrons strategy these cardholders and route their transactions to get a reduction on purchases. On their half, the cardholders get extra rewards for spending on the cardboard.

Initially, this jugaad began off with bank card nerds transacting on behalf of their family and friends however as bank card spending grew to become more and more rewarding, folks discovered extra methods to earn these rewards. Select Telegram channels started connecting cardholders with patrons looking out for reductions. Then, there are platforms like Yaper which allow folks on either side to find and transact with one another. Thus, cardholders may efficiently inflate their bank card spending and earn sufficient rewards that fulfil their aspirations.

So, what can probably go incorrect? Well, as per the phrases and circumstances of banks, private bank cards are meant just for private use. Spends that breach the revenue restrict increase a crimson flag at banks, which may shut the account anytime. For occasion, an Axis Bank bank card consumer, who didn’t wish to disclose his identify, mentioned that he had spent ₹3-4 lakh at a petroleum pump that led to the financial institution cancelling his bank card.

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The revenue tax division may pose one other set of troubles. It can monitor bank card spending by means of the Annual Information Statement (AIS) and lift scrutiny when the cardboard holder’s spending exceeds whole revenue.

Some bank card lovers declare to have provide you with a workaround to this downside as nicely. They preserve a paper path to show that the spending was accomplished on behalf of different folks. Some bank card customers mentioned they do that by charging a small price for such a transaction and deal with it as fee revenue. That means, solely the fee is reported as revenue and the transaction quantity will get reimbursed. Note that this fee is taxable at slab charges and attracts 5% TDS (tax deducted at supply).

Karan Batra, founder, charteredclub.com, mentioned he wouldn’t advocate this manner of incomes rewards as the method of proving that the transaction was accomplished on behalf of others would take months and create plenty of trouble. “The IT division will ask for varied paperwork similar to PAN particulars and written proof with a signature of the transaction. This may take months to resolve.”

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Updated: 20 Jun 2023, 12:44 AM IST