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  • 6 Tips to Avoid and Lower High Interest Rate on Credit Cards

    Spending carelessly on your credit card can always lead you to a debt trap and it can be a tedious and time-consuming experience to try and get out of it. The interest rates that you have to pay can range between 36% and 48% of your outstanding balance on the credit card. So, now let us look through the ways in which you can lower or even avoid high interest rates on your credit card.

    Go for balance transfer

    At times, you may be low on funds, and you cannot pay the amount of the credit card bill in full. Keep in mind that revolving credit to the next month incurs an interest of 3% to 4% every month. You can always use the service of 'balance transfer' (BT) if you have two credit cards. The card limit up to the amount can be availed as balance transfer. There will be a processing fee that is levied on the balance transfer.

    Make sure to pay the outstanding balance on your credit card in time

    It is mandatory to pay just 5% of the outstanding amount on your credit card. The balance amount will be carried forward to next month. You should, however, avoid doing this as it will lead you to a debt trap. If you do not make the payment of the 5% by the due date, you will have to pay a late payment fee. You should always try and make the full payment in time so that you will not incur any interest cost.

    No interest-free period for purchases

    When you roll over your outstanding balance to the billing cycle of the next month, you will have to pay a monthly interest at the rate of 3 % to 4%. If you roll over and also make new purchases every month, the interest might become too much and you will enter a debt trap. Keep in mind that there is an interest-free period on all your credit card purchases. This can go up to 45 to 50 days. In order to get the benefit, you should not have any outstanding amount. When you roll over an amount to next month, there will be no interest-free period. Make sure that until you clear your outstanding amount, you should not make any new purchases on the credit card.

    Convert into EMI

    If you cannot pay the entire amount, you can always convert it into EMIs. They come at a low interest rate and after conversion. The interest rate can be between 14% to 24% lower than the one on your credit card. Avoid using your credit cards abroad

    When you use your credit card abroad to make transactions in a foreign currency, it may can become expensive. If you use a credit card abroad, conversion charges will be levied, and when you use the credit card at an ATM, you will be charged additional fee. The conversion charges can range between 3% and 5%. You can always use a forex card while when you are abroad to reduce your cost.

    Deposit cash withdrawals as soon as you can

    If you need to withdraw money from ATMs with your credit card, you should deposit the cash back into your account as soon as you can. The withdrawals do not come with an interest-free period. You may also have to pay a one-time fee and also interest charges which you incur from the day you repay the amount.

    FAQs on 6 Tips to Avoid and Lower High Interest Rate on Credit Cards

    1. How much is the interest rate for EMIs?

      The interest rate can be between 14% to 24% lower than the rate of your credit card.

    2. How many days is an interest-free period?

      An interest-free period on a credit card can range from 45 days to 50 days.

    3. Will I have to pay a fee when I use the balance transfer service?

      You will have to pay a fee when you make a 'balance transfer' from one credit card to another. You can check with your bank to know about the fee for balance transfer.

    4. What is a high interest rate for a credit card?

      The interest rate of a credit card can go up to 45% per annum.

    5. When should I pay my credit card bill to avoid interest?

      You should pay your credit card bill before the due date to avoid interest and late payment fee.

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