The credit card facility comes with an interest rate. The interest rate is calculated on the outstanding amount or if a loan is taken against the card. The credit card interest rate usually differs in every bank.
However, in some cases, the rates may be higher than expected and thus can affect your overall monthly payment. But there are a few ways to reduce the rate, like maintaining a good card history, paying the bills on time, etc. This article will give you an overview of how interest rates function and the ways they can impact monthly payments.
Does Credit Card Interest Rate Affect Your Monthly Expenses
If you pay your bill on time, you do not need to worry. However, if you cannot make the due payments, interest rates will be calculated based on the outstanding amount. Moreover, you can pay a minimum amount, use the balance, and gradually repay the outstanding amount.
The higher interest rate will be charged on the outstanding amount every month, making it difficult for you to pay back the principal amount. Hence, to return the outstanding amount, you need to be able to pay more, automatically increasing your monthly expenses. Hence, it is better to choose credit cards like IDFC FIRST Bank with low interest, like 9%, to cut down your monthly expenses. However, credit card interest rates will differ with different cards. Thus, it is necessary to choose your card carefully.
Ways To Maintain A Low Credit Card Interest
Suppose you are applying for a credit card for the first time; remember that your card activity will determine your credit history. Also, you need to be very careful with your expenditures so as not to lag in making the card payment and avoid interest rates. However, if such an instance does arrive, these guidelines can help you reduce the interest rates.
Pay Your Bills On Time
The most important tip is to pay your credit card bill on time. This will enable you to keep your interest charges to zero. These cards offer a rollover option, i.e. you can pay only 5% of the outstanding amount and avail of the card balance. The outstanding amount will be transferred to next month’s cycle. These should be avoided since the amount naturally piles up, which increases the interest rate.
Opt For Balance Transfer
If the principal amount gradually increases, then it is better to transfer a percentage to another card. This conversion is done at a lower cost, like 1-2 per cent a month. This will help to lower the monthly interest rates. However, this only applies to people with more than one credit card.
Choose The EMI Option
Another way to reduce the interest rate is by opting for EMI options. Converting the outstanding to EMI can lower the interest rate to at least 15-20% compared to the card. You can opt for the EMI option while buying an expensive product or shift after the purchase.
Avoid Foreign Transactions
Though swiping your credit cards during foreign transactions is common, do you know that this can increase the credit card interest? Hence, it is better to avoid foreign transactions to avoid the processing charges.
Final Thoughts
Maintaining a lower credit card interest rate is essential to curb monthly expenses. However, sometimes, we have to adjust to the outstanding amounts. These guidelines help you keep interest rates reasonable and choose a credit card that’s appropriate for you.
