Credit cards are modern-day money, also referred to as plastic money. They are designed to enable a person to borrow money instantly from his bank with some pre-arrangements. But they don’t come without a price. Users must bear charges for credit card usage, the most common of which is credit card interest. But with a little bit of knowledge and planning, one can avoid paying interest for his credit card usage.
Benefits of having a credit card
Having a credit card can benefit a person in a lot of ways. First of all, it’s a good source of short-term loans without any interest. One can easily take care of his daily expenses with this without any extra charges. Moreover, it gives a person a chance to build a credit history, protection against fraudulent activities, and insurance coverage, etc. It also comes with a lot of perks and rewards based on usage. One can also make big purchases on EMI schemes under credit cards.
Fees you can avoid and fees you can’t
As credit cards are the sources of a revolving line of short-term credit to meet up the daily expenses, they involve a variety of fees. If the cardholder uses his credit card prudently, he can avoid some of these fees. The avoidable fees are generally annual fees, late payment fees, interest charges, foreign transaction fees, over-the-limit fees, returned payment fees, etc.
The unavoidable fees related to credit cards are usually cash advance fees, balance transfer fees, credit information agency fees, charges for statements and notification, etc. These fees are unavoidable because when someone avails a related service, then must bear the charges.
How to avoid credit card interest?
The most intriguing type of fee/charge related to credit cards is the interest. The interest fee of a credit card can accumulate very fast and make the credit card debt huge within no time. But there are plenty of ways to avoid paying interest for one’s credit card dues. They are technical and complicated yet effective.
Pay outstanding amount within the payment due date.
Whenever a person spends with his credit card, his outstanding balance rises. At the end of the billing period, he has an outstanding amount and a minimum due amount, which he has to pay within the payment due date. To avoid paying interest, he has to pay the full amount of outstanding balance on his credit card within the payment due date.
One can pay just the minimum due payment to avoid reporting to the credit agencies as a past-due borrower. But this won’t help him from paying credit card interest. He will have to serve interest for the rest of the outstanding amount netting off the minimum due amount. As such, to avoid paying interest for credit card usage, one should pay off the outstanding amount in full within the payment due date.
Avoid late payments.
The cardholder should make on-time payments for outstanding amount in each billing period. Credit card company charges late payment fees if the borrower fails to pay within the stipulated grace period, also known as the interest-free period. Moreover, some of the banks charge with higher interest rate after the payment due date. And this is the additional amount to the usual interest rate and the late payment fees itself.
Transfer existing credit card debt to a 0% balance transfer card
It is a smart technique to avoid credit card interest. Being high in amount, interests get accumulated on the outstanding amount. Hence, the debt may pile up on someone who is frequently failing to meet his payments. But he can easily transfer the whole amount to a 0% balance transfer credit card to avoid paying interest for his dues.
There are many banks like Citi, Wells Fargo, US Bank, HSBC, Amex, etc. who are offering 0% balance transfer credit card. This 0% balance transfer cards offer an interest-free period from 24 to 36 months on promotional basis. Users get the chance to pay off his debt within this interest-free period, and this way, they can avoid paying interest for their existing dues.
Avoid withdrawing cash from ATM using credit cards.
Credit cards facilitate the users with the ability to draw cash from ATMs. However, this can cost them a huge amount of interest, if the drawn amount is no repaid as the soonest possible time. Though there is a cash withdrawal fee which is charged when the cardholder draws cash from ATM, he is also imposed to an interest charge on that ATM withdrawal until he pays it off in full amount.
Interest on cash withdrawal starts from the day the user draws cash from an ATM using his credit card. If someone is planning to pay this debt over a period of time, he may get stuck with a huge amount of interest. So, it’s better to keep off from taking out cash from ATM using credit cards to avoid paying interest.
Plan large sum of purchases on EMI schemes.
To avoid credit card interest, it is wise to plan the big purchases on EMI schemes offered by the banks. Banks have several types of credit card EMI schemes for their customers. When someone is seeking for interest-free usage, he should look for EMI schemes that offer 0% interest during the installment period. In this way, he can easily pay off his dues over a planned time without paying any additional amount as interest.
Avoid spending abroad with credit cards.
Some banks charge their customers for their card swaps during foreign tours. Most of the credit cards come with dual currency facility. But other than purchasing something online sitting from home, if the cardholder uses his credit card abroad during his travel, his bank is likely to charge higher interest than the usual for this foreign expenditure. Hence, avoiding payments with credit cards in overseas tours can save a lot of bucks as interest.
Use credit cards for necessities, not for luxuries.
Budget expenses with credit cards and keep a manageable level of credit limit. The last tip to avoid credit card interest is to use credit cards only ration up daily necessities, instead of using it to live in luxuries. Keeping it to small purchases will make it easy to pay off dues in time and avoid piled up debt-burden on card. Moreover, it is also necessary to maintain a manageable level of cards according to one’s income level. This ensures avoidance of any irrational buying with credit cards and henceforth non-incurrence of interest.
Credit cards come with a lot of perks and rewards, and with the motto to make our lives better in this era of infotech. However, along with all these facilities, a high rate of fees also imposes on the user. But if the person is prudent enough, he will get multiple alternative ways to avoid credit card interest.