Credit cards provide a 45-day grace period, which can feel like free money. You can buy something today and pay for it later, all without interest.
But there is a catch. When you make a purchase and do not pay it in full, you can forget about the grace period and will incur credit interest, which can be as high as 36-42% a year.
For example, you purchase something for Rs 60,000 today. The following month, your bill arrives, and you pay Rs 58,000. You are still short Rs 2,000. Because you opted not to pay your full balance, you will now incur credit card interest on the original purchase amount, along with the late fee no doubt.
The interest was charged on the day you made the purchase, and you lose your “GRACE” period immediately.
Many people who have credit cards won’t be aware of the catch mentioned above because they have chosen an auto-pay option for the minimum payment. This prevents late fees from occurring; however, when you pay the minimum payment, interest accrues without you knowing. Financial experts opine that, Paying the minimum only keeps you in debt. Over time, those amounts compound into onerous debt. Always check and read your full balance.
Credit cards aren’t bad. They build credit scores. They help in emergencies. But they’re designed to be profitable. Banks want you to overlook the fine print. So, Read the terms carefully. Know the billing cycle as well as the interest rules. If you do this, you’ll be ahead of the game.
Pay your full balance every month, and create reminders for due dates. Don’t use autopay for minimum payments. Review your statements and keep an eye out for errors. Use credit cards for planned purchases and things within your budget. Doing this will help protect your wallet, and you’ll stay within the grace period.
If you want to avoid credit cards altogether, consider a debit card for daily spending. Personal loans will carry less interest than credit cards as well. Be mindful when using borrowed money overall, and budget accordingly so that you don’t have to borrow. Save money for emergencies instead. These methods and tools will help achieve the goal of reducing the risk of debt.
It seems greatly helpful to have a 45-day grace period. However, if you pay anything less than the full balance, you’ll begin to pay heavy interest the moment the due date has passed, so don’t be surprised.
If at all possible, you should always clear the total due; don’t settle for minimum payments if you truly want to optimize your ability to get out of debt quicker. Stay informed to avoid unnecessary debt traps, and always try to use your credit card wisely as a means to seek greater financial freedom.
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