One of the easiest ways to fall into a debt trap is to spend recklessly using a credit card. Digging yourself out of this hole takes a lot of time as well as money. The benefits of a credit card look fabulous. However, if you default on payments the interest rates can crush you for life.
Have a look at these tips to lower your interest rate:
1. Pay the outstanding amount when it’s due – This tip looks like the most obvious one in this list. For those of you in the dark, credit cards by issuers such as Visa and Mastercard allow you to pay as little as 5 percent of the outstanding amount every month. You must avoid this at all costs because this is the quickest way to fall into the debt pit. Failure to make the minimum payment results in a late payment fee charged along with a host of other fees.
2. Convert to EMI – Some big purchases on your card can be converted to EMIs. EMIs usually come with a lower interest rate than what you would have paid had you not converted it into an EMI. Converting to EMIs can make your interest rate fall from 12 to 24 percent lower than the interest rate on your card.
3. Deposit all cash withdrawals as quickly as you can – Withdrawing cash from an ATM using a credit card isn't usually interest-free. There is sometimes a one-time fee in addition to the interest charged until you repay the amount. Make it a priority to deposit money back as soon as you can to avoid paying these fees.
4. Don’t use your credit card abroad – Sometimes, there are emergencies where you need to use your credit card while abroad. In those cases, it's perfectly fine to use your card. However, avoid using your credit card while abroad because using the credit card comes with conversion charges as well as a host of other fees. These fees can rack up quickly and make using your credit card an expensive convenience.
Following these tips will make a dent in your interest rates.