Rahul and Anjali used to catch up over coffee every Sunday morning, a weekly habit from their college days. However, Rahul was beginning to worry about his skyrocketing credit card bills and wanted to ditch the ritual this weekend.

Anjali summoned him to the coffee shop, promising to treat him to some fresh brew and also suggest a solution to his money woes.

As they settled down with their coffees, Anjali asked to see his latest credit card statement on his smartphone. A quick glance through the PDF, and she smiled. Rahul figured class was in session.

Anjali asked, “How long have you been using this card?”

“Um… eight months,” replied Rahul nonchalantly.

“Do you know what statement credit is?” quizzed Anjali.

Rahul countered, “You mean credit card statement?” 

Anjali rolled her eyes and went on, “You receive reward points every time you swipe your card. These reward points can be used for many things. You can buy items off the discount mall, convert them into air miles, or convert them back to actual cash value. 

If you do choose to convert them back to cash value, you don’t receive hard cash, but it comes back as a credit balance in your statement, and that’s called statement credit.

The actual points-to-cash conversion ratio varies according to the service provider and the benefits available on the card. With a gold or platinum card, the cash value of the points could be relatively higher. For specialty cards like those that offer benefits on travel or dining, you end up accumulating points at a faster rate as well.”

Rahul sat up, interested.

“Look here,” Anjali said, pointing at the screen, “You have already accumulated 4757 points. All these points can be converted to statement credit. You can refer to the welcome kit, which will mention the point-to-conversion ratio, or call the card company’s helpline to get the specifics.

This cash can be used to pay for other services at merchant outlets that have a tie-up with your card issuer. Better still, you can use that cash to offset some of your credit card debt.”

The detailed explanation put a smile on Rahul’s face. He clearly had no idea that every time he swiped his card, he can potentially offset some of the expense through the points he earned.

“That’s not all,” Anjali went on. “Most card companies will waive annual fees if you cross a certain threshold of spending in a year, and also offer customers complimentary services or bonus points as incentive. One can opt for bonus points and get them converted to statement credit as well!”

Rahul excitedly noted that in another four months, at his current rate of spending, he could easily earn the bonus points, and use it to pay off some of his card debt. However, he admitted he needs to be more careful about using his credit card, and learn to spend within his means.

Anjali nodded in approval.

The bill arrived and Rahul grabbed it. Anjali’s smarts hadn’t completely erased his self-inflicted misery, but it seemed to have definitely reduced the pinch. Not to mention, he was earning more points with this swipe as well!