Credit cards are the modern man’s go-to financial resolution. Everybody would agree with this. Right?
- Sudden financial emergencies – credit card!
- Late income or lost your job – credit cards!
- Eager to enjoy cashback and lounge accesses – credit cards!
- Bank payments not going through – swipe a credit card!
But what if this go-to solution has some essential factors that should never be overlooked?
One of those most important factors is the credit card interest rate.
What is a Credit Card Interest Rate?
The credit card interest rate, also known as the financing fee, is the cost of transactions that do not fall within the interest-free period. It differs from one card issuer to the next, and it may also differ between different credit cards from the same issuer.
These costs, unlike other credit card fees such as yearly or membership fees, are dependent on usage. As a result, these are only inferred if you do not pay your credit card account in full. Before applying for a credit card, you should be aware of the interest rate that will be charged, as well as when and how much it will be charged.
For instance, if you are using an HDFC Regalia credit card just to use, you get the benefit of HDFC Regalia credit card lounge access (which is complimentary.) So, if you have not used up any of the credit limits, you will not incur any interest rate. Now, this does not include the other charges (such as annual charges, joining charges, or such.)
When is the Credit Card Interest Rate Applied?
These interest rates will only apply when:
- You pay your bill partially.
- You pay the minimum balance.
- You do pay the bill at all.
- You cross the due date.
- You convert your transactions into an EMI.
How to Have an Interest-Free Period for Your Credit Card?
Most credit card issuers give you at least 21 days, sometimes 30 or more, to pay off your account amount. The grace period begins on the day your monthly statement is due, which differs from your card’s payment due date, which is normally later in the month. If you bank online, you will most likely receive your statements as soon as they are available. It may take a few days if you receive paper statements.
Banks are required by law to present customers with a statement at least 21 days before payment is due, but they are not compelled to provide a grace period.
How to Avoid Interest Charges?
You may typically avoid paying interest on your credit card. The simplest strategy to avoid paying interest and keep your monthly grace period between statements and payment due dates is to simply align your payments with all due dates, statement periods, and credit card restrictions. If you never carry a balance, you will never pay interest.
Ways to Lower Your Interest Rates
1. Going with the Due Dates: If you have several credit cards to pay off each month, you may be able to adjust your statement and payment due dates. These are typically set up when a new account is opened. Unfortunately, this means that many cardholders must manage multiple statement periods and pay off different cards at different times throughout the month.
This may benefit certain people depending on what each card is used for and how they choose to fund each payment. Many of us might find it easier to recall due dates if our banks synchronize all of our statement periods to end at the same time each month.
2. Paying in Full: While setting payments to the same due date for numerous cards may simplify things, it does not imply you should ignore each of your credit card balances for the rest of the month. When possible, pay down your balance in small amounts throughout the month to assist in minimizing your overall debt and keep you conscious of your spending and habits.
If you miss your payment due date and your debt has already decreased because you paid it down earlier in the month, you won’t carry as high a burden. Because interest is calculated as a percentage of the card’s balance, the lower the balance you carry over, the lower the dollar amount of daily interest.
Are there Credit Cards with No Interest Rates?
Many cards offer 0% APR promotional periods, and some of those allow you to transfer an existing balance. Some people use this to buy time to pay off current debt during the promotional period so that interest does not continue to accrue. Balance transfers most often incur a fee of 3% to 5% of the transferred amount. It’s important to perform the math to ensure that the balance transfer fees you’ll pay are less than the interest you’re now paying on your debt.
If you are unable to pay off a transferred sum by the end of the promotional period, you will forfeit the 0% interest rate and must return your debt at the usual rate. Check to see if the 0% APR introductory rate applies exclusively to balance transfers or if it also applies to purchases made with the card during the promotional period. If it solely pertains to balance transfers, you should read the terms for making purchases carefully to understand how the card works fully.
Conclusion
Sometimes, your balances can become unimaginable – if you just let it compile. A mistake you are never supposed to make. So, be careful – and make sure you pay your dues on time and most probably in full.