Credit cards are great when used as a financial tool. Most credit card companies make money due to the user being uninformed about the billing process. You can avoid almost 100 percent of interest on your credit card by knowing what factors they consider before billing you.
Read further to know how keeping your average daily balance high can get you out of debt. Here are the 5 smart ways to reduce your credit card interest.
1) Convert to EMI
Don?t hesitate to convert your credit card dues to EMI due to the additional charges that come along with it. It’s true that on conversion to EMI, the credit card company will charge you additionally in form of interest rate, processing fee, and prepayment. But the overall interest rate still comes out to be much lower than if you would have opted to pay the whole amount within a month. So, convert your dues to EMI to reduce your credit card interest.
2) Avoid using credit cards abroad
Another way to reduce your credit card interest is by avoiding it’s usage while traveling abroad. It’s a good idea to carry your credit card while traveling abroad as it can be handy in case of an emergency. But you should never use it the way you do in your native country. In particular, don’t use it to withdraw cash in foreign currency. There is a conversion charge that all major credit card companies apply when the credit card is used at an ATM.
3) Make multiple payments throughout the month
Credit card companies calculate the interest based on your average daily balance. Average daily balance is the amount available in your account. For instance, if your credit limit is $1000 and you have already purchased products worth $600, then your average daily balance for that moment will be $400.
It’s better to pay off the dues in case you decide to do more purchases in the same month. Keeping your average daily balance more as a possible is the best way to reduce your credit card interest.
4) Ask for a lower interest rate
Yes. It is possible to negotiate your interest rates with the credit card company. All you have to do is call the customer service department of the company and ask for a lower APR(Annual Percentage Rate). To convince the customer care representative, you will have to use all your persuasion skills you have learned until now. But get it done instead of paying higher interest. Usually, they lower the interest rates when you demonstrate how your income is increased since the day you bought the credit card.
5) Pay the credit card outstanding amount on the due date
At the end of each month, your credit card company sends you a statement mentioning your minimum payment amount and the total amount due. Generally, it is recommended to pay the total outstanding amount but you can also convert that amount to EMI.
Moreover, you can avoid a late fee by paying the minimum payment but that will keep the average daily balance low. Hence, you will have to pay more interest next month. So, by paying the outstanding amount on or before the due date you can reduce your credit card interest.
Conclusion
I hope this information will help you lower your credit card interest and get you out of debt as early as possible. To reiterate, here are the five things that you need to keep in mind.
1) Convert to EMI
2) Avoid using credit cards abroad
3) Make multiple payments throughout the month
4) Ask for a lower interest rate
5) Pay the credit card outstanding amount on the due date
