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OLM Desk - 02 November 2020

Chandan, Pune cksonal123@gmail.com

My monthly salary is Rs 50,000. I have two credit cards with limits of Rs 1,50,000 in each. What will be my annual expense limit through these cards?

A credit card with a limit of Rs 1,50,000 per month means the amount of your monthly expense is limited to Rs 1,50,000. If you spend Rs 50,000 from one card in a month and return Rs 10,000 out of it, then your limit would be Rs 1,50,000 - Rs 40,000 +  interest on Rs 40,000. and the whole amount will be payable next month. Every month if the minimum amount is paid, it keeps on accumulating interest on outstanding. Hence, at the end of twelve months the limit will be Rs 1,50,000 (outstanding + interest payable). Credit card limits are calculated every month. It is advisable to pay the outstanding balance first while keeping aside the amount you want to spend at the beginning of each month. As soon as your salary is credited to your bank account, utilise it for your variable expenses. Use your credit card smartly and utilise the limit without paying extra interest on it. Ideally, use it only for an emergency.

Try not to exceed 20 per cent of your monthly income, even though you have a higher credit limit. In my opinion, splurging with plastic money will burden you with heavy credit card debts. The interest rate is very high, around 3-4 per cent monthly on the outstanding balance.

Hina Shah, Certified Financial PlannerCM & Coach, LUHEM

Sujith, Trivandrum sujiths413@rediffmail.com

I am a 38-year-old businessman from Kerala. I have been investing Rs 40,000 for retirement in SIP of large, small, and mid-cap funds. In the next eight years, I plan to invest in a property worth Rs 40 lakh, for which I can invest Rs 30,000 in SIP. Please suggest an option that can provide returns of 8-10 per cent.

For your property purchase goal, you can look at allocating your SIP of Rs 30,000 into large-cap funds and aggressive hybrid funds, as investing in mid and small-cap funds require a longer horizon of over ten years, since they are comparatively more volatile.

Suhel Chander, Certified Financial PlannerCM, Handholding Financials

Suman Surendran, Chennai, suman1002007@gmail.com

I have been investing Rs 7,000 in L&T Emerging Businesses Fund and Rs 7,000 in Mirae Asset Emerging Bluechip Fund. However, L&T Mutual Fund has been giving negative returns to date. Shall I continue or shift to SBI or Axis Small Cap? Also, please suggest if Mirae Mutual Fund is a good option too.

L&T Emerging Business Fund is a small-cap fund. These funds are invested with a time horizon of over 10 to 15 years, as this category is very volatile and can deliver good returns if held for the long term. Mirae Asset Emerging Bluechip Fund is a large and mid-cap fund and is less volatile. I would suggest you avoid putting all your eggs in one basket. You have not mentioned the time horizon for which you are investing in these funds.

Suhel Chander, Certified Financial PlannerCM, Handholding Financials

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