It is not a sound idea to use a credit card, carelessly as it is one of the simplest ways to arrive in a debt pit. Getting out of this trap is not only time-consuming but expensive indeed. Here are a few ways to use credit cards wisely and lessen the rates on return:
- Know the billing cycle and pay before due date
A billing period is an interval within which one needs to pay the bill/amount of their credit card.
Let’s say the billing time frame/tenure of a credit card used for unsecured business loans is somewhere between, 5th April to 4th May. It explains that the statement for the credit card is made, on the 4thday of every month. The draft contains all the data about the expenses/transaction from the last month. If someone purchases anything on the 5th, it then moves to the next month’s billing cycle.
- Things to consider: To keep the rates of interest on credit cards less, pay the outstanding sum by the due date.
- Know the grace period
The grace period indicates the timeline, within which you must clear your dues.
For example, if the card used for unsecured business loans has a grace limit of 15 days, then that’s the time frame for this void interest. Considering the early example, if 4th of every month, is the end of your billing period, you can use the 15 days of grace period, till the 19th of every month. After19th, charges will be imposed, on the outstanding balance.
- Things to consider: During this particular timeframe, you don’t have to pay the interest on the outstanding amount/bill.
- Avoid carrying previous month charges on present bills
Waving the outstanding balance/surpass amount to the next month billing cycle will incite monthly interest rates at 3-4% pushing you towards that debt trap.
Generally, the interest-free limit on credit card purchases can indeed go up to 45+ days.
- Things to consider: For getting hold of benefits, the outstanding amount needs to be nil. So, if you roll over a particular sum to next month’s bill, there’s no interest-free term on the latest purchases.
- Balance transfer
A balance transfer is a process/means of transporting/shifting money from one credit card to others, saving the interest payment rates.
- One may opt for the “BT or Balance transfer” feature, which is available or possible only if one has multiple cards.
- You can get an amount similar to that while availing as BT. However, once the facility is chosen and used, the facility gets sealed hereafter.
- Using this tool, one can shift the outstanding value to another credit card at a subdued/reasonably low interest rate, somewhat in the range between 1 to 1.77% a month.
- Things to consider: Be aware of the other charges which are put upon, generally 1% of the BT amount. There are times when card issuers give facilities like 0-interest BT. Zero credit offers are short-term and usually for 3 -12 months.
- Go for EMI’s
Often cardholders use their credit card to purchase costly items. If funding it off at a time is a concern, you can turn over to EMIs as they come at a cheap rate.
The interest could be somewhat about 14-24% lower. The card issuers normally, have charges incorporated within the process of transferring a credit card amount to an EMI. There are two well-known types of EMI facilities:
- The first is the dealer EMIs that a dealer awards when you purchase a product and pay using their card.
- Alternatively, your card issuer might grant/offer you an EMI for making/doing high-cost purchases by the card.
- The consequence of not paying the sum back can be drastic, similar to taking a business loan against property.
- Things to consider: Remember that any form of rewards point will not be gathered on EMI amounts and further, be aware of the processing cost associated!
- Payback cash quickly
It’s like taking/acquiring a fund/loan against property. If you opt for funds/loan from ATMs via credit card make sure, to transfer the cash back as soon as possible, as these transaction/withdrawals do not have an interest-free period.
- Things to consider: Repaying, back the amount quickly, helps in avoiding a higher rate of interest.
- Avoid using a credit card on foreign land
Using a credit card abroad on foreign soil might be expensive. Since there are currency exchange charges, and if used, in an ATM, an added fee is put on. The exchange charges can go anywhere, in between of 3 to5%.
- Things to consider: Carrying a forex-card while traveling/touring abroad is excellent in terms of getting better rates and reasonable charges.
You will have to return the amount along with proper interest rates on time. A credit card is circulated by a credit card provider, which are designed to pay for items while shopping on online or offline platforms.
Soniya Sharma has been working as a professional charter account at loanClix – Best home loan finance company in India. She loves to share excellent stuff about home equity loan, low-interest personal loans etc. You can also follow her on various social media platforms such as Twitter, Facebook.