Credit card loans may be harmful, particularly for new users and those who have fallen victim to them. What seems to be free money is actually a pricey business. If you want to acquire a credit card or already have one, you should be aware of its uses and risks.

It’s all fine when credit cards offer incentives, discounts, cashback on purchases, and give you access to airport lounges, complimentary cinema tickets, and other perks. However, interest charges of 2.50%-3.50% each month might add up to 30%-45% yearly. However, if you pay the whole amount owing on or before the due date, this will not be the case.

When do Banks impose Credit Card Interest Fees?

A credit card loan will not yield cash. Instead, they are recognised. The card can be used again and again until the debt is paid off. After the balances are paid off, the credit can be used. Credit card companies impose interest beyond the grace period (usually 20-25 days). They charge interest on the amount borrowed. It is not necessary to pay the whole sum owed all at once. To avoid punishment, a minimum sum might be paid.

The interest rate on a credit card is the cost of borrowing money. Credit card interest rates are normally presented on an annual basis. This is known as the Annual Percentage Rate (APR) (APR). The annual percentage rate (APR) is approximately 36-48%. The monthly interest rate is normally approximately 3-4%. Because of the high interest rate, it is the most expensive loan. Credit card interest is calculated daily by banks. As a result, compounding is utilised to compute credit card loan interest.

The time between the date of the credit card transaction and the due date of payment for the billing cycle is known as the interest-free period, also known as the grace period. It typically ranges from 20 to 60 days. During this time, credit card transactions do not incur interest if the whole outstanding balance is paid.

7 Ways to avoid paying Interest on Credit Cards

The following are the ways to Avoid paying Interest on Credit Cards

1. Budget your Expenses

Make a budget for yourself each month. Ensure that your spending do not exceed your salary/income limit. At whatever cost, do not go above your budget. If you use your credit card to take advantage of any deals, make sure you pay the bills in full during the grace period. Review your credit card activities each month and maintain track of your credit card costs. Set up automatic reminders to pay off your credit card balances. You may avoid paying high loan rates this way.

2. Spend based on your Requirements and Earnings

If the balance on a credit card is paid in whole by the due date, no interest is charged. Spending according to your necessities and avoiding impulse purchases can ensure complete payment. Examine your income and determine how much you can pay in full. This would also need a review of your monetary expenditures. Following these guidelines will guarantee that your buying needs are met while keeping your debts manageable.

3. Say No to ATM Cash Withdrawals

A debit card works differently than a credit card when withdrawing cash from ATMs. Cash removed from debit cards does not incur interest, but this is not the case with credit cards, which begin charging interest the instant you withdraw cash. This is in contrast to a retail transaction, when a cardholder receives a 20-50-day interest-free credit term. The monthly interest rate is 2.50%-3.50%, with a fee of 2.50%-3.50% of the cash amount taken.

4. Paying Online Rather Than Offline

You can pay the card dues using any of the online ways available. These techniques can include any of the following:

You may even have Auto Pay enabled on your credit card account so that you never miss a payment. Activate it via net banking or at a nearby branch. This ensures prompt payment and, if done in full, eliminates the possibility of interest.

So, if you properly follow the preceding guidelines, you may save not only interest but also taxes at the appropriate rate on the former.

5. Pay down all Outstanding Amounts

Pay down your credit card debt in full. Credit card companies need a 5% down payment from their customers. If the minimum payment is made, customers will not be charged a late fee. To avoid late fines, pay the 5% sum. They will, however, be charged interest on the remaining sum. It is usually preferable not to roll over credit card debt. Rolling over will also result in significant interest payments. Credit card interest rates are high (36%-48% per annum). Once interest payments begin, it will be tough to pay off the debt. And here is when the debt trap begins.

6. Understand your Credit Card’s conditions completely

Each credit card company has its own set of rules and regulations. Make sure you are familiar with and understand the terms of each credit card, including interest rates, grace periods, credit limits, offers, and so on. In an emergency, choose a personal loan, which is less expensive than credit cards and has a longer payback time. Personal loans also allow you to borrow more sums than credit cards allow. Use your credit cards prudently to avoid being indebted.

7. Change to Debit Cards

Debit cards are highly suggested for individuals who struggle to resist the impulse to overspend while using a credit card. By choosing a debit card over a credit card, you will avoid sliding into debt and paying interest costs. But don’t forget about the deals that may be obtained by utilising credit cards. Credit card companies, for better or worse, provide several perks to their customers. Credit cards top the list of incentives offered to plastic money users, whether it is cash back or substantial reductions.

How can you get a lower Credit Card Interest Rate?

Your credit card terms are negotiable, and you may be able to get a lower interest rate simply by asking for one. Your likelihood of getting a lower rate, a larger credit limit, or any other benefit will depend on how well you have handled your existing credit. Someone who keeps their credit usage to a minimum and never misses a payment is more likely to be successful in negotiations.

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