Advantages of paying secured credit card dues on time
In today's world, where credit scores hold great importance, it's crucial to explore all available options and select the one that suits your financial needs. Among the various techniques available, obtaining a secured credit card, like the Kotak811 Dream Different Credit Card, stands out as a viable option for many.
Understanding secured credit cards
Secured credit card functions are similar to unsecured credit cards, but the former is more accessible. These cards are a great alternative for building your credit score and opening up the gateways to getting approved for an unsecured credit card and other loan offers. Also, by consistently paying your bills on time, you can unlock several rewards and benefits. These cards offer much the same rewards and benefits as unsecured credit cards and can help you amp up your credit score just the same.
Advantages of paying credit card dues on time
All credit card dues have to be paid, and paid on time. Timely payments come with their own set of benefits too.
1. Avoid late payment fees
By paying your credit card dues promptly, you can steer clear of late payment fees. These things come into play when individuals fail to pay the minimum amount due, resulting in additional charges on the remaining debt.
2. Save on high interest rates
Paying your credit card bills before the due date helps you save on high-interest rates. Some cards have high annual interest rates, and managing credit card bills can become challenging. By staying ahead of your payments, you can avoid accumulating excessive interest charges altogether.
3. Positive impact on credit score
Timely payment of credit card dues and maintaining a low credit utilisation ratio can have a positive impact on your credit score. Consistently meeting your financial obligations builds a strong repayment history, boosting your creditworthiness, it’s a big green flag on your credit profile basically.
4. Increased credit limit
When you pay your dues on time, banks are more likely to increase your credit limit. It can open doors to better offers and loan opportunities, empowering you to meet your financial goals more effectively.
5. Easy access to credit
Timely payment of credit card dues strengthens your repayment history and increases your credit limit. It, in turn, allows easier access to credit and enhances your financial options.
6. Incentives and offers
Banks often provide several offers and incentives for credit card users. By paying your bills on time, you can avail of these benefits, maximising the value of your credit card.
7. Record of expenses
Using a credit card allows you to effortlessly track all your transactions. Monthly credit card statements provide a comprehensive summary of your expenses, aiding in budgeting and financial planning.
8. EMI facility
For significant purchases, credit cards offer the convenience of deferring payments and opting for Equated Monthly Instalments (EMIs). It allows you to distribute the cost of your acquisition over a period, making it more manageable.
Is it beneficial to pay credit card dues on time?
If you're wondering whether paying credit card dues on time is beneficial, the answer is a yes. By paying your dues early, you can:
1. Settle your debt faster
Timely payments enable you to quickly eliminate debt. Consistent payments can unlock several rewards as well, not to mention keeping you financially free.
2. Reduce interest charges
Partial payment of credit card bills results in accumulating daily interest charges for the following month. By settling a significant portion of your outstanding balance, you can alleviate the burden of interest payments altogether.
Understanding credit card management
Managing your credit card effectively is essential, regardless of whether you're a new user or an experienced cardholder. One common concern is the outcome of paying only the minimum due on your credit card. It is important to practise responsible credit card management and understand the implications of paying only the minimum due. Here are some key points to consider:
1. Paying minimum due vs paying before the due date
Paying only the minimum due on your credit card allows you to avoid late payment fees. However, it doesn't eliminate the interest charges on the remaining balance later. On the other hand, paying off before the due date can completely negate interest, free up more room for further credit, and forego any chances of missing the payment.
2. Building a credit score
A strong payment history and low credit utilisation ratio are key factors in building a good credit score. Paying your credit card dues before the due date has a positive impact on your credit score. By consistently making on-time payments, you demonstrate financial responsibility and improve your overall creditworthiness.
3. Avoiding high interest charges and debt accumulation
Interest charges can range from 25% to 30% for credit cards. Paying your credit card dues timely helps you avoid high-interest charges. Repaying your credit card dues on time can help prevent debt accumulation and maintain better control over your finances.
4. Effective credit card management
To make the most of your credit card, it's important to understand and implement effective management strategies. Some additional tactics to improve your credit score and overall financial health include:
- Getting a new credit card and setting up recurring bills and automatic payments to that card. It helps establish a solid payment record.
- Paying off your credit card balances a few days before each statement closes. It reduces your overall credit utilisation and improves your credit rating.
- Monitoring your monthly statements to track your expenses, ensure accuracy, and maintain control over your spending habits.
Shaping a better financial picture
A credit card can be a powerful tool in shaping your finances. When used responsibly, it will fetch you numerous benefits, such as a good credit rating and attractive rewards programs. By understanding the fundamentals of good credit card usage and implementing effective payment strategies, you can avoid any pitfalls and ensure your finances shine just as bright as you.
Remember, responsible credit card management, timely payments, and a focus on building a strong credit score are key to financial well-being.
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This Article is for information purposes only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. Bank makes no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Newsletter. The information contained in this Article is sourced from empanelled external experts for the benefit of the customers and it does not constitute legal advice from Kotak. Kotak, its directors, employees, and contributors shall not be responsible or liable for any damage or loss resulting from or arising due to reliance on or use of any information contained herein.