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Credit cards are a boon to many but can turn out to be a trouble for some if not used intelligently. Most of the times, people tend to exceed their budget when there are online discounts going on credit cards. But, no matter how tempting the offers are, as a credit card holder, you must always keep in mind that you have to spend within your credit limit. If you do not do so, you are most likely to follow the discounts blindly and overspend in the process which might result in delayed payment and also the interest.
Almost all banks provide a grace period of up to 50 days within which there is no interest levied. However, the first 30 days is the month for which you are using the card and the transactions are done. The next 20 days is the time you get to pay the bill.
How much interest is incurred on late payment?
If you do not pay the bill within the time period offered by the bank, you have to pay the late payment fee as well as the interest which is 3.35% per month which makes it to 40.2% per annum. For instance, if you are getting a cashback offer of Rs. 1000 on spending Rs. 20000 from your credit card, but if this payment will exceed your monthly credit limit, you must think about the extra expenditures on your part. Exceeding the credit limit will not only attract the over-limit charges but also the interest of 3.35% on the total outstanding amount. So, this Rs. 20,000 spending will attract an interest of Rs. 670. Also, as you know that there is an additional tax that is GST of 18% which is added to your bill each month and there is a separate GST levied on the late payment fee which altogether is far more than the cashback you will get on spending over the limit. Do you really want to pay so much? No, of course. But, you can save yourself from paying so much more by following some simple guidelines.
Be it online shopping or offline, you must take care of a few things to save yourself from paying more than your bill. Have a look at some of the suggestions from our end.
Tips to save on extra charges
- Take into account the credit limit: Spend as much as you want but you must not exceed the monthly credit limit on your card. There is an additional limit exceeding fee which will affect the total due amount that you will have to pay to the bank. So, avoid using more than the credit limit and especially your budget.
- Pay within the Grace Period: It is also important to be clear about the duration between the date of purchase and the date interest starts being charged on that purchase so that you can manage your expenses accordingly. This interest-free period is for your convenience only so take advantage of it and pay the credit card bill within this period else you will have to pay the overlimit penalty as well.
- Avoid tempting Cashback Offers: The offers are provided by the card issuers merely to tempt the existing customers to spend more and thus inflate the bill.
- Check properly the Reward Points: The reality behind the rewards is that they are far less worthy than the extra interest you will accrue if you fail to pay off the money spent on such bonuses.
Hence, one should use the credit card judiciously and should not get tempted by the offers blindly.