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Credit card interest listings and rates are often followed by a painful sigh. And another one. As it is considered as loose debt, card owners are levied steeper interest rates compared to personal or vehicle loans. And since one seldom bother to monitor card spends regularly as they are used for daily expenses, it slip their mind that all purchases are paid with interest, which subtly accrues from the day you bought the item(s). It is easy to calculate your piling interest and up your game rather than falling into a throttling debt. A credit card interest rate calculator can be accessed at any official website of the particular credit card provider.
The key to bringing down or even eradicating your credit card interest rates is to recognize how it is computed. Credit cards levy interest on the basis of your average balance. As the billing period comes to an end, the card user’s overall outstanding amount on each day are counted and then divided by the number of days in the said period. For instance, if you use INR 100 on the initial day of a say, one-month period, then your daily balance could be roughly the same (i.e. INR 100). But if you swipe for the same amount on the final day of the billing period, you will be charged only INR 3.33 (100 divided by 30). Ahem, don’t be fooled by this small number. Two words - Interest compounds.
Although credit cards compute interest on each charge on a daily basis, almost every provider offers to waive off the charges if the customer settle their net balance once and for all, especially before the stipulated date. This duration between the due date and the end of the billing cycle is called as the grace period. And that is an excellent chance to sidestep monstrous interest rates. Basically, it is like getting a loan totally free of interest. However, if card user is not able to shell out the due amount (i.e. even a small balance) before the deadline, the grace period and its benefits no longer apply to him/ her. Not only will customers is obliged to pay interest on each of their charges in their recent statement cycle, but they will also start to pay interest on these charges on the next cycle too. Vicious cycle indeed! In simple words, clear away everything before the month ends to lead an interest-free life.
Credit card is certainly something that should come with a statutory warning, despite the perks. It takes time to warm to the rules of this number game. Some take quickly to it and pay as less as possible. Some take years to untangle. After all, how many of us really manage to pay off the whole balance in time?