Credit cards are gaining tremendous popularity among Indian borrowers. Much of its popularity stems from the fact that it offers a convenient option to make purchases and repay the amount without paying interest. However, if you fail to make a credit card payment on or before the due date, you will have to incur interest charges and other penalties.
If you are frustrated with paying interest on purchase transactions, you can make use of the interest-free period to significantly reduce the overall cost of borrowing. Most banks offer interest-free periods on credit cards. This period varies across issuing banks; it generally ranges between 45 to 50 days. It is known as the grace period, which can be used to avoid interest charges.
Here are the top tips to wisely use the interest-free period on your credit card:
- Time your purchases
After getting your credit card, check the billing cycle and ensure to make a credit card payment at the beginning of your billing cycle. Knowing the bill generation date of your credit card allows you to maximize your interest-free period. For instance, after purchasing your credit card, you will have around 45 interest-free days to clear off your debt.
The best tip to use your credit card interest-free period is by making a credit card payment at the start of your billing cycle. Let’s say that your credit card billing date is the 1st of January to the 1st of February, you should pay your outstanding bill during the first week of your billing date. Doing that will give you up to 50 days of grace period until you pay back the whole amount.
Also, the longer you take to make payments, the lesser days you will have in your grace period. If you manage your purchase transactions based on the assigned due date, you will avail of maximum benefits from the interest-free period.
- Pay your credit card bill on or before the due date
If you wish to get the maximum benefit from your credit card interest-free period, you will have to pay your credit card balance on or before the due date. If you carry any amount from your last month’s billing cycle, you will have to pay interest charges on the remaining amount, which is not wise at all.
It would be wise to use online platforms to make credit card payments. If you pay your credit card balance through cheque, it may not get credited to the bank or gets delayed due to some reason. If your payment gets delayed, you will have to pay unnecessary interest. Therefore, using internet banking or mobile banking is a better alternative than cheques. It makes the payment process quick and hassle-free.
- Manage your expenses across multiple credit cards
If you have more than one credit card, make sure to have a concrete plan on how to manage your expenses. If the billing date of both your credit cards are aligned, paying your credit card bills becomes easy as you can avail of a grace period on both cards. Let us assume that you have two credit cards – Credit Card A and Credit Card B. If Credit Card A’ billing date is the 10th of January, and Credit Card B’s billing date is 2nd January, it is advisable to use Credit Card A’s purchases after the 10th, and Credit Card B’s purchases before the 10th. Doing that will enable you to get a longer interest-free period on both credit cards.
- Never use cash payment
As a credit card user, you may know that the interest-free period is not available on cash payments. Besides that, your issuing bank may charge you a cash processing fee for withdrawing cash using your credit card. The worst part is that the cash processing fee is levied during the grace period. So, you will avoid withdrawing cash from ATMs if you would like to save money on interest.
In short
The interest-free period on your credit card is more like a bonus that you can avail of to avoid interest charges. During this period, your bank will not charge any interest or penalty. Although it is tough to make all your credit card payments at once and in full, planning it well can save a significant amount of money in interest charges and other penalties.
