Do you own a credit card? If yes, you are perhaps familiar with the facilities that it can offer. You can easily purchase at a store that accepts credit card payments even when you do not have the amount with you. However, you will also agree that there are some downsides to using a credit card, most of which are related to the repayment process. But that should not stop one from using or buying a credit card. There are various ways by which you can manage your credit card account and enjoy the benefits.
Benefits of Credit Card
There are various ways that a credit card can be put to use. Some of the common benefits are discussed here.
● Purchase Beyond the Limit – Credit cards allow you to go beyond your immediate availability of money and purchase goods.
● Credit History – You can use a credit card to develop a credit history. This, in turn, will help you with your future loans. But remember that you need to be prompt with your credit card dues to develop a good credit report.
● Protection Against Purchase Disputes – Credit cards make the process of disputing online purchased goods much easier than debit cards due to the Fair Credit Billing Act.
Effects of Late Payment
Certain consequences follow from missing the payment due date. Some of these are listed here.
● Interest rate increases on your card, inflating the minimum payment amount
● A late fee is added to your next credit card bill, and it continues each month that you miss the payment or fall behind
● Late payments affect your credit report negatively. Payment history is an important component of a credit report and, consequently, your credit score can also fall when you miss on your payments
● Late payments can cause you to miss some of the exciting rewards that often accompany credit cards of all sorts
So what is the best way to avoid such negative impacts of a late payment? Read on to know.
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5 Best Times to Pay Your Credit Card
Pay credit card bill on time! This is the most obvious way of escaping from the harsh consequences of making payments late. But additionally, there are some measures through which you can ease the process of owning a credit card.
Before exceeding your credit utilization limit- to keep your credit card used within the limit, you can fix a minimum utilization ratio. The lower you keep the ratio, the easier it will be for managing your card. You can estimate the ratio by dividing the credit balance with the credit line and multiply it by 100.
Before the end of the billing cycle- paying early on the billing cycle is a wise move. It not only prevents you from missing the due date but also reduces the charges. This is because when you pay early, your credit account reflects a low balance for several days. This prevents the card lender from charging you with large sums of money. Additionally, if you fail to pay off the credit amount in full in a month and be subject to interest, early payment will reduce the applicable interest rate.
Before the due date- making a payment towards your credit card before the due date arrives can help you in many ways. To start with, it helps you to make multiple payments. Meaning, you can break the amount you owe into several parts and make payments throughout the billing cycle. This will reduce your financial burden as well as your credit utilization rate in case you spend more than the limit. Due date has an important role to play in your credit report.
Before the statement closing date- your account statement closing date is typically the last day that your billing cycle ends. The daily interests that you are charged accumulate into monthly finance charges. And it is on the statement closing date that your credit account is assessed for the entire billing cycle and charges are applied. Note that this date is not the same as your payment due date. The latter is the day by which you need to make a minimum payment to keep your account on the positive side. When you pay before the statement closing date, you avoid your credit score from dropping due to a high credit balance.
Before exhausting your finances- paying ahead of time is a good option. However, a better way to keep your payment regular is to pay off your credit account as soon as you have the money. This means if you have an amount debited to your account, instantly clear away your monthly credit. This way you ensure making payments when you are financially capable.
Thus, credit cards are a valuable asset especially in the time of emergency. However, some impacts defaulting on your credit card payment can lead to. To avoid those negative aspects of owning a credit card, you should consider paying before the due date. Other options include paying before the statement closing date, in the initial days of your billing cycle, and when you have sufficient funds.