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How to Check Credit Card Interest Rate after Due Date?

A Credit Card is a boon when you use it correctly. But it can turn into wane when you are not aware of the best practices. Even the Best Credit Cards in India can turn out to be a problem when you are not careful. You need to keep a tab on the usage.

First, let’s understand how cards work and learn about the benefits of using a Credit Card.

1. With a card in hand, you always have a backup fund for emergencies. Even urgent hospital bills or last day school fee can be paid with a Credit Card instantly.

2. You can plan investments regularly. For, additional purchases can be processed through Credit Card without hurting your investment plan.

3. If you own a business, funds never come at the right time always. In such cases, you can manage certain important bills with a Credit Card.

So far, you would have understood why a Credit Card plays a role of money buddy in your life. But the friend can quickly turn into a foe when you start skipping the payments.

What happens when you do not pay on time?

The interest for the Credit Card is calculated in a fixed rate based on the outstanding of the current month. The interest rate varies from 18 to 35%. The provider’s policy and the applicants’ eligibility decide the rate of interest. You need to pay the interest on the outstanding amount on or before the due date.

When you do not make the payment on time, the interest is calculated as a daily balance method, and the same is how the interest for fresh billing is also calculated. The same is the case when you make any cash withdrawals as well. In these cases, the interest is charged from the date of transaction until you make the payment completely for the cash withdrawal. When you cannot make the payment completely, and make only a partial payment, the charges are applicable for the entire due amount.

The formula the bank uses to calculate the daily interest is:

(Total Outstanding Amount X (interest rate charged by the bank) x 12 months) x number of days of outstanding/ 365

Have you heard about the interest-free period?

When you make any purchase just after the bill is generated, and your transaction is not billed until another 30 days. If you make payment before the next bill, you need not pay interest on the same. But missing the payment due date can lead to disaster.

The interest on the outstanding is calculated based on each day you have refrained from making the payment. You are penalized for each day’s delay. The charges are piled up massively, and for missing a few days, you will be paying for years. Another disadvantage is missing the payment is that your credit score gets affected.

Your CIBIL score goes low as 30% of your credit rating is based on your Credit Card payment discipline. When you miss the Credit Card payment, your score depreciates at a faster rate. So, if you are thinking of applying for a loan in future, you must get regular in repayment of credit card dues.

Herein it is important to understand that a personal loan is also not the right tool to repay your Credit Card bills.

1. The first and foremost rule of dealing with Credit Card is to pay before the bill due date. Do not consider any sort of delays. Whether you set an SI or make NEFT payments or pay through the mobile app, you must ensure the timely payments.

2. If you have many Credit Cards, assess the interest rates on each card when you find it difficult to pay any bill on time. Consider opting for the balance transfer option for the card with a higher rate of interest. This way, you can bring down a bit of the charge.

3. If you can, convert into EMIs. The charges can be lowered, and also there is a definite way of getting the amount closed. Also, you need to find how much time it would take to close the outstanding. If you are expecting to do the same in 2 months, converting into EMI is not advisable.

4. Do not aim to use Credit Cards as and when you like. Own cards only when you have the need for the same. An active card can always be used to meet unexpected expenses or during an emergency. For one-off usage, for example, if you need to buy a bike, opt for a loan rather than swiping your Credit Card.

5. Pay more than the minimum due. Else, you will keep paying the minimum due only.

Do not say yes to all the offers which promise you to sell the best Credit Cards. It can be a tempting offer but can worry you in the long run. Always keep a tab on what you do. Do not get Add On cards on all the Credit Cards. There are high chances of missing the payment due, and if your spouse or kids use the same, do not fail to keep a tab on it. You should also check the messages from the Credit Card companies about the purchases. This can help you keep away from the worry of fraudulent activities.

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