Tuesday, 15 October 2019

PayTM and Why It's Worth It

*This article is now outdated due to PayTM's recent changes. These changes include a 1.75% credit card fee on all transactions. I will update this article in the future but for now only the credit churning section can apply as a last resort. You can read about the terrible changes here: https://blog.paytm.ca/blog/important-update-convenience-fees/ *

If you had told me 15 years ago I could funnel all my bills through one company and "save money" I would've said "Not today Satan, not today!" 
Having worked as a teller for one of the big banks in Canada, I've seen my share of people coming in with fake cheques, forged letters and other stories about scams they've unwittingly signed up for. It sucked when I had to break their hearts and tell them they've been scammed. 

The easiest way to figure out if something is a scam is to literally just google "X scam" - X being the product you're interested in. The front page will be loaded with forums full of angry consumers and then you'll know to stay away. The second easiest way is to follow the money. PayTM for instance is owned by an international Indian company with billions in revenue and has investments from incredibly large corporations such as Alibaba (The Amazon of the East). They've also partnered with major Canadian banks, such as RBC.

This is great news for us - PayTM is legit and offers its product to Canadians. Thousands of Canadians use the app to process bill payments and it's talked about often on ChooseFI Canada. So why should we FIREwalkers use it?

Let me show you my numbers and you can decide for yourself at what point you've heard enough and begin to download the app. I'd kindly ask that you use my referral code so I can grab some gift cards, please and thanks!! It'll go a long way towards supporting my blog and my mission. Code: PTM5237163

  1. You can download the app here
  2. Once you've opened the app and set a few things up, you'll be asked about a referral code - if you enter mine (PTM5237163) you'll get 5,000 PayTM points (equivalent to a $5 gift card)
  3. The points are really just a light bonus, the main reason for using PayTM is below
  4. Pay as many bills as you can through PayTM - especially the ones that don't take credit card or charge a 2.5% fee to do so (like your utilities). PayTM processes many of these for free
  5. Using the app, I found these bills like I would using my online banking, just search and enter your account number
  6. The app will ask you how you want to pay - plug in your credit card at this point. For this example, I'm using my Rogers Elite MasterCard
  7. Sidenote: The payment takes 2-3 business days to process, so don't leave your bills to the last minute

I pay about $200 a month of utilities here in Kitchener, ON. That's a 12-month average and in case you're wondering how it's so low, my family consumes a Mustachian level of 300kwh or less of electricity per month, instead of the average 750kwh in Ontario.

Anywho, using the steps above I've paid for my utilities using the app. Let's break out the math to see the advantage:
  • I collected 200 worth of PayTM points worth $0.20 in gift cards. Lol.
  • My Rogers card offers 1.75% cashback on all purchases, so $3.50. Neat.

Hey.. $3.50 x12 months is $42 of cashback. That's just from my utilities - imagine any other bill you might be able to process for free?

Once upon a time your property taxes could be processed for free but PayTM squashed that party mid-2019. Still, we can be creative and there is a way to take advantage of PayTM's credit card method while paying their fee. It involves a practice called "credit card churning" and I blog about this here (not released yet). Let's do some more math:

  • I've signed up for BMO's Air Miles Elite MasterCard, offering the first-year free and 3,000 bonus Air Miles as long as you spend $3,000 in the first three months, picture to the right
  • Knowing I've got my property tax bill coming up, I activate the card, add it to my PayTM app and pay the bill in full
  • I earned 1000 in PayTM points (worth $1 in gift cards)
  • I earned 3300 in Air Miles points ($347 cash rewards or $495 travel rewards)
  • Using my app right now, it'll cost $52.50 for PayTM to process the transaction
  • Total earned: $295.50 in gift cards or $443.6 in  travel rewards

As you can see, activating the BMO card was worth it - it took only one transaction to complete the churn. If you wanted to gain an extra $2 in PayTM points, you could split the bills into $1,000 increments (PayTM's monthly cap on tax bills) and pay once a month but the $2 is a pretty measly return for the added planning). 

The process of using the BMO card and then another is called "credit card churning." If you think churning credit cards is too time-consuming a prospect, think again. It's really quite easy and ultimately less than an hour of my time per card. 

Property taxes are only one huge expense - you can add university tuition, rent and sometimes even child care to the app. Many of these are likely not free to process but combined with credit card churning, you have a income-producing app as long as you were going to spend the money in the first place, regardless of credit cards or PayTM. If you were to increase your spending to get more rewards, you'll be playing right into their hands.

One last example: let's say we put $12,000 worth of expenses through PayTM this year, but had to pay $250 for some of those transactions. Let's also argue that you churned 4 travel credit cards (so 1 every 3 months which is 4 hours of your time per year) with the intent of spending all rewards on travel alone. How much money are we talking about..?

  • 12,000 PayTM points earned ($12 worth of gift cards)
  • $180 credit card travel points (Assuming the credit cards reward travel at 1.5% of spending)
  • $2000 in bonus credit card travel points
  • -$250 in PayTM processing fees
  • -$50 in unused points (when churning multiple cards one after the other, you'll often end of leaving $10-15 worth of points unused, there was just no way to redeem them and continue to churn another card - oh well)

Grand Total: $1,892 from churning credit cards through PayTM

If this article sounds like it has as much to do with churning as it does with PayTM, its because it does. PayTM is not particularly lucrative on its own, it requires valuable credit cards to begin with or the minimal effort you put into it will render minimal results.

On your path to FIRE, increasing your income is paramount. Using the combination of PayTM and credit card churning provides you with tax-free redemptions such as travel and gift cards.

Tomorrow I'll be translating VTSAX for you. Tired of trying to open a Vanguard account in Canada? Let's take a look at the ETFs available for Canadians and make our pick together.

Ryan Myricks
You can email me here: canadianfire1@gmail.com
You can listen to me here: www.exploreficanada.ca


  1. I have always worried about paytm security. A lot of banks/cards state if you give permission through these kind of things you are on the hook if you get hacked. What makes paytm special/ How do they get around this? How do they make money?

    1. The security was also my concern but they have partnered with top Canadian Banks and these guys wouldn't let just anybody use their logo for their service. I would conclude that the security of adding your credit card to PayTM is quite good.

      How do they make money? In India and globally it's quite obvious, by processing transactions and the multitude of other services they provide. In Canada, I'm not so sure they do make money here. They are opening a new office in Montreal soon and have an existing office in downtown Toronto right in the tech sector. I think the product "PayTM" is a loss leader but the engineers they've hired and the data they collect from Canadians are likely very valuable to a company bent on growth.

  2. Excited to see your next post