India is one of the fastest growing economies in the world and has a big pool of people who want a credit card in their name. Since the credit card users are rapidly growing in the country, it gives a boost to the credit card companies to come up with new offers and interesting services to maintain their position in the market. A credit card can be your best friend if handled properly and can be your worst enemy if handled without care. It is quite tricky to handle a credit card if you are not able to analyze how much should you pay on your credit card. While people make blunders by skipping their credit card payments, others pay the bill in parts.
It is important for all credit card users to understand that once you start using a credit card, it becomes your responsibility to pay off the transactions done through your credit card well in time. Though the bank requires you to pay at least the minimum amount due on your card, it is recommended to pay the bills in full to avoid any interest and charges.
While purchasing through a credit card, we have this notion in our mind that we have to repay for all the purchases done through the credit card. Many people are able to make the full payment towards their credit card bill but there are some people who are not able to pay for their debts in full. It becomes difficult for them to decide how much should they pay on their credit card. Hence, after reading this article, you will have a better understanding and knowledge of how much should you pay on your credit card –
Paying Your Credit Card Balance In Full
The first and topmost priority of any credit cardholder should be of paying the balances in full. By doing this, you are avoiding any type of interest that will accrue on your outstanding balance. If you do not pay the amount in full, it will keep accruing month over month and then it will become quite difficult for you to pay such a hefty amount at once. Hence, if you keep paying your balances regularly, you will not have to face a situation of a debt trap.
Suggested Read: Tips To Handle Credit Card Debt Responsibly
Benefits of paying the bill in full
– Your credit score gets improved if you pay your credit card bills in full and on time.
– No late payment fees will be charged.
– You can avoid unnecessary interest charges.
– By seeing your proper repayment pattern, the bank may offer you a credit card with an enhanced credit limit and better reward points.
Paying at least the minimum due
The minimum due is that part of the bill that needs to be paid to avoid any late payment fees on your credit card bill. It is generally 5% of the total credit card bill subject to a minimum amount, which can be different for every card issuer. You can also avoid a negative impact on your credit profile by paying the minimum amount. Paying this amount is definitely better than not paying any amount, but still paying the full bill remains the best option.
When you pay just the minimum amount out of the total due amount, then the interest keeps on charging on the remaining amount till the time you do not clear the whole amount and you are not eligible for any interest-free period in the further billing cycles till this whole amount is paid.
What to Do When you are not able to pay off in full
Now in a situation where you cannot pay the amount in full because you do not have a sufficient amount with you, but you can pay more than the minimum due, then you should deposit any amount that is more than the minimum due but less than the full amount. Anything paid above the minimum due amount will help you in reducing your overall credit card bill, will attract less interest, and will help you in clearing off your debts faster.
When you have multiple credit cards
When you own multiple credit cards and are confused about which bill should be cleared first, then you should first figure out the rate of interest on each of your cards. The debts on the card which bear the maximum rate of interest should be cleared first and the minimum due amount should be paid towards the other cards. And when the debt of the highest interest-bearing credit card is over, then you should do the same for the debt of the second-highest interest-bearing card. This is the best strategy by which you can pay off your debts effectively.
Also Read: How Many Credit Cards Should I Have?
When it is time to pay off your credit cards, try to pay the maximum amount that you can. And if you are unable to pay the full amount, you should at least pay the minimum amount to avoid any interest and late payment charges. The more the balance remains unpaid, the more interest it will attract towards itself, and then it will become difficult to pay for you to pay such heavy amounts. Getting a credit card is not the only thing, you also have to learn to manage the repayments of your credit card. If you fail to do so, you will end up in a debt trap. Also, overutilization of your line of credit can negatively affect your credit score. Hence, a credit card should be used up to that limit only till which you will be comfortable with repayment.