Having a credit card is the best way to manage your finances during a cash crunch. It allows you to pay for things, such as booking train and air tickets, payment of utility bills and insurance premiums, dining, etc from the credit card limit assigned to you based on your income and credit score.
However, it is worth noting that if you do not use your credit card wisely, you will likely have more burdens than you can handle. If you do not make your credit card payments on time, you will need to incur interest charges and other penalties. While using your credit card online, you need to be cautious of purchases and ensure to pay your credit card bills on time and in full.
Here are the top tips to reduce your interest payments on your credit card bills:
- Pay the maximum amount each month
Paying the minimum amount is a great way to avoid late payment fees, but you will have to incur huge interest charges due to the longer payment period. Therefore, make sure to pay the maximum amount every month to reduce the period of payment. The shorter your period of payment, the lower interest you will have to pay.
- Avoid waiting till the due date
A mistake most credit cardholders make is waiting till the due date to pay their credit card bills. It is better to make your credit card payment on the day when your salary sits in your bank account. This way, you can significantly reduce the interest payment from the moment you receive your salary. Furthermore, if your monthly salary comes after the due date, you can request your bank to reschedule your credit card payment due date according to your salary credit date.
- Avoid further purchase
If you have credit card bills to pay, do not add further purchases on your credit card. It would be wise to put it away until you pay off your debt. When you use your credit card to add more purchases, the interest rate will increase. Since you do not have an interest-free period to avail of, you may not be able to pay off your debt.
- Request for a lower rate
If you feel that you are paying a higher interest rate, you can contact your bank and request a lower rate. Your bank may reduce your interest rate depending on your relationship. For instance, you must have a good track record to convince your bank.
- Do not put medical expenses on your credit card
Putting your medical expenses on your credit card is not the wisest decision you can take. At times, your medical bills may not fit your budget, and putting them on your credit card can cost you a lot of money in interest. Before paying your medical expenses with your credit card, check whether or not you can repay the amount on time and in full.
- Opt for a balance transfer card
A balance transfer is when you move your debt from one credit card to another that comes with a 0% interest rate for a period of up to 18 months. So, if you owe more than you can pay off in the next few months, consolidating your debt with a 0% balance transfer card may be a wise move.
Some credit cards charge a balance transfer fee to move your debt. It usually ranges between 1% to 3% of the total balance. It is worth noting that you need to have an excellent credit score to get approved for a balance transfer card. Keep in mind that you cannot transfer your debt among credit cards from the same issuer. So, if you are opting for a balance transfer, make sure to pay off your debt before the 0% introductory period expires.
- Convert to EMIs
You have the luxury of converting your dues into equated monthly instalments to pay off your credit card dues. Your bank may offer you anywhere between 18% to 25% per annum. However, you will have to ensure to make your credit card payments on time, or else the interest rate will shoot up to its original level of 30% to 45%.
- Get a low-interest credit card
If you consistently carry a balance on your credit card, it would be wise to apply for a low-interest credit card online for future spending. Getting a low-interest credit card depends on your financial situation. If you can carry balances beyond 12 to 18 months, you may want to get a credit card with a low ongoing interest rate. You will be able to acquire a low-interest or 0% card only if you have a good credit score.
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