You can pay your credit card bill in several installments or at once. Essentially related to a credit card are interest-free payment periods, extra repayments, and a free month. Their effects on personal finances can be unpredictable, both positively and negatively.
Do you pay your credit card bill wisely?
A credit card can be a useful tool when your salary is not yet credited. Most credit card companies offer at least 30 days of interest-free payment, which allows you to make purchases when money is tight. Using a credit card’s non-interest payment time can help prevent extra costs and thus prevent your financial situation from deteriorating. On the other hand, a credit card can offer significant benefits, such as travel insurance or product security, compared to a regular debit card. A debit card works like a credit card, but the invoice is always paid by the end of the non-interest payment period.
When interest starts to accrue, it’s a good idea to pay off your credit card bill as quickly as possible, instead of saving. The interest rate on savings is significantly lower than the credit card bill. Psychologically, there may be a higher threshold to shorten your credit card bill if it cannot be paid off in full. However, as a whole, the debt will be repaid in smaller installments and in the longer term. This is because the interest rate is calculated on the basis of the outstanding loan principal and, if there is more credit available, the interest rate is also higher.
How does an interest-free payment work in practice?
Let’s say your credit card’s due date is set to be the 15th of each month, and the billing period is March 25th – April 26th. It is a good idea to choose a payday as the due date, as the invoice is easily paid on the day when the money is available. In this example, we show you how to pay for a big purchase, such as a washing machine, in practice.
1.4. Purchase of a new washing machine
15.4. The credit card invoice due date on which the invoice for the previous billing period, March, is paid.
26.4. The billing period will change, and products purchased after today will be billed in June.
15.5. Due date for April shopping such as washing machine
1.4. Therefore, the purchased washing machine will not be paid until 15.5. If you buy a washing machine 26.4, it will still be paid 15.5. If the washing machine was purchased on 27.4, the due date would be only 15.6. You can optimize your credit card billing period for as long as possible. In this case, you can get up to 45 days of non-interest payment on your washing machine by buying it on the right day 27.4. Tactics can be especially handy, especially if you know you will be getting more money, for example in the form of overtime pay or holiday pay.
The interest-free payout period is virtually a free loan for 30 days. In principle, banks could charge interest on the same amount, but would not. This does not sound like a reasonable business for profit-making companies. The guiding principles for banks are to encourage spending, and interest-free credit card payment times lower the threshold. Other features of the credit card, such as points accrual and Purchase Security, also make it easier for you to make a purchase, which is a benefit to your bank.
Credit card prepayment and prepayment
When you apply for a credit card, you choose a minimum percentage reduction, which is usually between 3% and 100%. If the minimum down payment percentage is 20% and your credit card debt is $ 500, you must pay at least $ 100 on the due date. The remaining € 400 will start to accrue on credit as agreed.
You can also reduce your credit card debt days other than the due date with an additional down payment. You can do this by paying each time with the same reference number on your credit card bill. With the technology, you can transfer money to your credit account right after your purchase, giving you the benefits of a credit card such as security for your purchase, and your credit card bill is already paid for. In addition, if the price of your purchase exceeds your credit line, you can increase your credit line by transferring money to your credit account, for example, to secure product protection for expensive purchases. The terms of any additional repayment should be checked with your bank or credit card provider, policies may vary by financial institution.