We all understand the importance of credit cards. Whether it is an emergency that entices an annual sale, or a vacation with loved ones, your credit card always comes in handy. However, note that it is essential to stay within your means, maintain a Credit Utilisation Ratio (CUR) of less than 30%, and use your credit cards diligently. Overusing or spending too much can lead to an irrecoverable debt trap, which takes a toll on your credit ratings, credibility, and the possibility of future loans or mortgages. Read on to explore some of the most important tips that can help you manage your credit card debt and reduce credit card interest rates and charges.
6 Ways to Reduce the Interest Charges and Debt Accruing from Credit Cards
Here are some valuable tips that will help you use your credit cards prudently:
Don’t Make Multiple Payments
You can use your credit card to your heart’s content, provided you have the means and resources to pay for the usage. If you have a stable earning potential and a decent flow of income, you can use your credit card for any kind of expenses, take advantage of the nocash-availability scenario and interest-free period, and make the payment within 40 days of using the credit card.
Making a full payment each month doesn’t let you pay any extra charge on the card. You can also pay as you earn. Making timely payments, automating your credit card payments, and paying in full ensures the least charges on your account.
Go beyond the Minimum Payment
It is a misconception that if you just make a minimum payment, you manage your credit card well. Undoubtedly, this is better than not making any payment, which can lead to extremely high-interest charges plus penalties. However, a minimum payment only ensures you pay the bare minimum required. This won’t help you reduce your interest charges or mitigate your debt. As mentioned above, making regular payments, paying in full or more than the minimum, can help you in paying less interest charges.
Look for Low-Interest Credit Cards
When applying for an online credit card, don’t just settle for any credit card. Consider your requirements, rewards and cashback offers, and the lowest interest rate when choosing a credit card. Several financial institutions in the market offer low credit card interest rates. So do your research, check the reviews and ratings of existing consumers, and verify the consumer support segment of the credit card provider before you take your pick.
Stick to Necessities and Avoid Luxuries
Credit cards give you the power and freedom to spend on needs and desires that your pocket wouldn’t allow. This may lead to indulgent shopping for luxuries, lavish vacations, and unnecessary products and services. Mind your spending and keep track of what you need and what you don’t. It is highly recommended to stay within your means and buy only what you can afford.
Keep a Constant Check on Your Credit Card Balance
Keeping a constant check on your credit card statement enables you to track fraudulent activities or wrong debits on products you haven’t purchased. Credit card providers provide you 24/7 access to your account through mobile apps, so it isn’t difficult to monitor your credit card religiously.
Avoid Cash Withdrawals
If you are running short of cash, withdrawing cash using your credit card or taking a credit card loan is a great way to resolve financial emergencies. You get the benefit of no documentation and instant disbursal of funds. However, both options come with high-interest charges. If you have to withdraw cash in case of an unavoidable situation, ensure that you repay the debt as soon as possible to avoid paying high-interest charges.
Ensure you follow the tips mentioned above to reduce your debt and avoid paying high-interest rates and charges on credit card usage. Also, remember that credit cards are a privilege that should be used only for necessities and emergencies. Overusing your credit cards can be quite lucrative, but you must think of the adverse consequences of doing so. So, use your credit card smartly and enjoy its multiple benefits.