Spending extravagantly with a credit card is not a good thing. This soon entangles you in the quagmire of debt. It takes a lot of time to get out of it. It also gets expensive. Sometimes you have to pay 36-48 per cent interest rates on the outstanding credit card balance (post rolling over).
Here you are being told about 6 ways. These will help you in using the credit card properly. These will also reduce the interest burden.
1. Pay the credit card dues on the due date
Credit card whether issued by Visa or Mastercard. It is mandatory to pay only 5 percent of the credit card balance every month. The balance amount can be rolled over to the next month. You should avoid doing this at all costs. This can put you in a debt trap. Late payment fee along with interest and tax is levied for non-payment of the minimum amount of 5% on the due date.
What you should do: Try to make the full payment by the due date. This will keep the interest cost zero. Pay the outstanding amount in full by the due date to avoid the interest cost on the credit card.
2. Don’t buy new when due
On rolling over the outstanding amount in the next billing cycle, interest is charged at the rate of 3-4 per cent monthly. Keeping it rolling over and simultaneously making new purchases every month generates huge interest. Soon it entangles you in a vicious cycle of debt.
Credit card purchases generally have an interest-free period. It can also be for more than 45 days. To avail this facility the outstanding balance should be zero. This way, if you carry over or roll over some amount in the next month’s billing, there is no interest-free period on new purchases.
What you should do : Do not make any purchases with the card until the dues are paid. This will reduce the interest amount.
3. Avail Balance Transfer
Due to shortage of money, people are unable to pay the bill amount in full. If this amount is carried over to the next month’s billing cycle, monthly interest is charged at the rate of 3 to 4 percent.
What you should do: In such a situation, ‘Balance Transfer’ (BT) facility can be availed. This facility is available only to those having more than one credit card. However, as soon as it is used, the card limit up to the amount taken as BT gets blocked. Using this facility, the outstanding amount can be transferred to any other credit card at a lower interest rate. This rate of interest can range from 1 to 1.77 percent per month.
“Balance transfer is the process of transferring your debt from one credit card to another. Through this, interest can be saved every month,” says Manav Jeet, MD & CEO, Rubik Technologies.
However, processing fees may be involved in this. It is usually one per cent of the BT amount. Sometimes the card issuing company offers zero-interest BT facility.
4. To pay the dues, convert
It into EMI. It is possible that you can make an expensive purchase with a credit card. If you are concerned about paying it in full by the due date, then convert it into EMI. Less interest will have to be paid than this. By doing this, interest may have to be paid up to 14-24 percent less than the card.
What you should do :There are two types of facilities to convert the dues into EMI. Navin Chandani, CBDO at BankBazaar, says, “The first is merchant EMI. Merchant offers when a product is purchased using a credit card. The second option can be offered by credit card issuers. In this, EMI is used to buy an item of high value. can be offered.”
5. Deposit the cash withdrawal as early as possible If you have withdrawn cash from
ATM using your credit card, deposit it as soon as possible. This is because such withdrawals do not have an interest-free period. From the first day till the amount is not repaid, one-time fee along with interest may have to be paid.
What you should do: The interest is less on depositing the withdrawn amount as soon as possible.
6. Avoid Using Credit Cards Abroad
Using a credit card abroad for foreign currency transactions is fine, but it can be costly. There will be conversion charges for using a credit card abroad. If it is used at an ATM, additional charges are levied. Conversion charges can range between 3 per cent and 5 per cent.
What you should do: Alternatively you should carry a forex card with you while traveling abroad. This allows you to keep the overall cost down. Like our Facebook page for regular updates on stock market and personal finance
