credit cards have become an important financial tool. It gives an individual the flexibility to purchase and manage their expenses. However, credit card interest rates can sometimes make you feel outrageous. This interest rate is called a finance charge. It is the rate charged by the credit card issuers. The interest rate is applicable to those who don’t pay their outstanding bill in full. Hence, this interest rate may sometimes shoot up. For example, if you have a credit card bill of Rs.20,000 and you make a partial payment or the minimum amount, in this case, the credit card issuer would levy an interest rate as per the policy of the company. This interest rate may vary.
Sometimes, the amount may shoot up, and in this case, you will be required to pay a hefty amount. But with some wise tips and timely check free credit scores online, you can keep a tab on your credit score. In this blog, we will be highlighting a few tips that will help save on the high-interest rate.
5 Tips to Avoid High-Interest Rates on Credit Cards
Pay Credit Card Bills On time
One of the ways to save on the high-interest rate on credit cards is to pay the bills on time. Being a defaulter in your payment terms can negatively impact your credit score as well as can lead to a higher interest rate. As much as it is convenient to use a credit card, to ensure its viability in the longer run, timely payments are important. Paying the bills on time saves you from being on the defaulters’ list and also prevents you from the higher interest rate.
You can make the full payment by the due date to avoid a higher interest rate. Most people tend to pay a minimum amount or some percentage of the total bill. This will add up to the interest rate. So, avoid doing so.
Track your spends
One of the first steps towards avoiding high-interest rates on credit cards is to track your spending. Being a check on the expenses can help in maintaining better control over the finances. You can also use budgeting apps or create a spreadsheet to manage your purchases and monitor your spending habits. Eventually, it helps you identify when you Are overspending and keep a check on the same. All this will eventually help you optimally use credit cards.
Moreover, it will help you identify areas where you may be overspending and allow you to make necessary adjustments to stay within your budget.
Check your credit score
Keeping a regular check on the credit score is also significant. You can check credit reports online or avail of the services of platforms that offer free credit score checks since this credit score plays an important role in determining the interest rate you receive on the credit cards. Hence before applying for a new credit card or if you are looking for a balance transfer, it is important to keep a check on the credit score. A higher credit score translates to a better interest rate and favorable terms and conditions. Conversely, poor credit scores may highlight a lack of discipline when using credit cards. To get a better credit score, focus on improving it by making regular payments and keeping your credit utilisation limit low.
Transfer your balance
If you have a credit card with a higher interest rate, then you may consider transferring the balance to another card that offers a lower interest rate. For this, it is imperative to check the different credit cards and the interest rate offered by them. When transferring your balance to a card with a lower interest rate, you can reduce the interest charges and pay your debt faster.
However, keep in mind that balance transfers often come with transfer fees and certain terms and conditions. Ensure you read and understand the fine print before proceeding with a balance transfer. Additionally, avoid accumulating more debt on the new card and focus on paying off the transferred balance within the promotional period.
Convert your High-interest payments to EMI
If you find yourself unable to pay off your credit card balance in full each month, converting high-interest payments to Equated Monthly Installments (EMIs) can be a viable option. Many credit card issuers provide the facility to convert your outstanding balance or large purchases into EMIs at a lower interest rate. This can help you manage your payments more effectively and reduce the burden of high-interest charges.
When considering the EMI option, be sure to compare the interest rates and terms offered by different credit card issuers. Calculate the total cost of the EMI, including any processing fees or charges, to determine if it’s the most cost-effective solution for your situation.
Avoiding high-interest rates on credit cards requires careful financial planning and responsible spending. By tracking your spending, monitoring your credit score, transferring your balance, and considering EMI options, you can effectively reduce your interest charges and minimize debt accumulation.
Remember, it’s essential to always read and understand the terms and conditions of any credit card or balance transfer offer before committing. Maintain discipline in your spending habits, pay your bills on time, and strive to improve your credit score. By adopting these strategies, you can take control of your finances and avoid the pitfalls of high interest rates on credit cards.