Credit Cards are highly convenient and offer multiple benefits. It lets you shop online and offline, eliminating the need for using cash to make purchases. It lets you build a credit history. It also usually offers various incentives like cashbacks and reward points each time you swipe your card. Besides, the most significant advantage of a Credit Card is that it lets you get easy access to credit. Hence, you can use the card to make purchases and pay for them later.
However, you should spend money carefully when using a Credit Card. This is because using it carelessly can send you into a debt trap. You also need to avoid paying interest at high Credit Card interest rates. Let us understand Credit Card interest rates better and explore ways to lower or avoid the interest burden.
About Credit Card interest rates
Credit Card interest is the price you pay for borrowing money from your bank. However, the interest only applies if you cannot pay your Credit Card bill before the last date. This interest is also called the finance charge. When the Credit Card interest rate is stated annually, it is known as the Credit Card Annual Percentage Rate. While APR works as an annual rate, Credit Card issuers usually use it monthly to calculate the accumulated interest.
Ways to lower or avoid Credit Card interest
When lowering or avoiding this interest, you can follow these tips:
- Pay Credit Card bills timely
Credit Card issuers let you pay a minimum amount every month and roll over the balance to the next month. However, you should completely avoid this. This is because it can become the fastest way of landing in a debt trap. If you do not even make the minimum amount by the due date, you may need to pay a late payment fee along with the interest charges and taxes. Instead, try to pay your entire Credit Card bill on or before the due date. This way, you do not incur any interest costs.
- Avoid new transactions
If you roll over the outstanding balance on your Credit Card to the next billing cycle, you may incur monthly Credit Card interest at a high rate. When you keep rolling the outstanding balance over and simultaneously make new purchases each month, the interest portion may balloon. Therefore, avoid making new transactions using your Credit Card unless you clear your outstanding dues. This helps keep the interest costs lower.
- Pay back cash withdrawals quickly
If you need to withdraw cash from ATMs using your Credit Card, deposit the money back as soon as possible.
- Convert to equated monthly payments
Opt for a Credit Card EMI facility for big-ticket purchases. This lowers the applicable interest rates.
Conclusion
Now that you know the tips, you can consider them when lowering or avoiding high interest on your Credit Card.