Credit cards have changed the way we access funds and manage our money. It offers a great way to access funds during a cash crunch. For instance, you can use your credit card to pay for expenses, purchases, rents, and travel without worrying about interest charges. But, there is a catch here. It is crucial to make your credit bill payment on time. Failing to pay your bills on time will result in high interest charges and other penalties.
Here is when you should pay your credit card bills on time to avoid any financial burden:
Why should you make early credit card bill payments?
Every month your credit card issuers send a credit card statement that also contains the due date. It signifies that a billing cycle has ended, and you should pay your bills. To avoid penalties charges and harming your credit card, it is imperative to pay your bills on time and before the due date.
It impacts your credit utilization ratio
The due date is not necessarily the time when your credit balance will be reported to the Credit Bureau India. When you keep a large balance, your credit utilization ratio increases. It is the amount you owe against the credit you have available. For instance, you have a credit card limit of Rs. 100,000/- and your outstanding balance is Rs. 45000/-, your credit utilization is 45%. A higher credit utilization ratio negatively impacts your credit score.
As a rule of thumb, the lower your credit utilization, the better it is to maintain a healthy credit score. Make sure to keep your credit utilization ratio at 30% or below.
Your issuing bank reports your balance to the Credit Bureau India on a day each month, which is not necessarily the due date. For instance, your credit card bill payment is due on 10% of each month, but your credit card issuer reports your balance on the 5th of each month. If your credit card issuer reports Rs. 45000/- balance on your credit card, it would be seen as 45% credit utilization even if you paid it off in full before on time. Your credit score will end up low despite having a solid payment habit.
So, it is imperative to make your credit card bill payment whenever your credit utilization ratio touches 30%, regardless of when your bill is due.
Importance of making early credit card bill payment
It is crucial to pay your credit card balance in full every month to avoid charges and other penalties. Paying your credit cards bill on time and in full will result in no interest. It means that you do not have to worry about paying interest and other penalties. However, if you carry a balance from previous months, you will have to incur interest charges.
Make credit card bill payments before the due date
When you receive your credit card statement, it contains details such as the list of things you have been charged, and how much you owe in a billing cycle. It includes minimum due in credit card and the due date. If you wish to avoid late payment fees, you will need to pay at least the minimum due on your credit card by the due date.
Consequences of making late payments:
- If you do not pay the minimum due on your credit card, you will be charged a late fee. The late payment fees depend on your credit card policy and whether it is the first time you have been late.
- Failing to make on-time repayments will hurt your credit score. If you are more by more than 30, it will show up on your credit report, causing serious damage to your credit rating.
How to manage your credit card bills?
- Keep an eye on your credit utilization ratio and ensure that it is 30% or less.
- Keep track of your spending so that you do not spend more than you can afford to repay in one month.
- Opt for SMS alerts from your credit card issuer. This way, you can keep tabs on your balance and the due date.
- Call your credit card issuer and request an extension if you cannot pay your bills on time.
- Check your credit card statement every month to keep track of your spending. This way, you can also prevent unauthorized transactions.
In short
A gold piece of advice would be to pay your credit cards bill by its due date if you cannot pay soon. If you have to pay a large amount, consider paying a large amount or make multiple payments in a month to keep your utilization ratio within the recommended range.
At times when money is needed urgently, and you cannot wait weeks for your loan or credit card application to be processed, an easy option is Instant Approval Cards.
Just give us a missed call on 022 6181 6111 to explore our unique Free Advisory Service.
The holder can pay back the entire borrowed amount at the end of each month, or a minimum fixed amount.
This is required to show a proof of steady income to be able to pay the credit card bill.
Credit History: Credit history is a record of how the applicant manages credit related activities.
The APR gives a general idea on how much you pay for availing the card and facilitates in comparing different issuers.
