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6 ways to lower your credit card interest payment

Last updated on: February 26, 2013 11:02 IST

6 ways to lower your credit card interest payment

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Rajiv Raj

Here are some simple tips that can save you a great deal of money and reduce financial stress.

Rahul Khanna's mother was hospitalised suddenly and she did not have medical insurance. To cover the expenses in this difficult time, Rahul used his credit card to make a payment to the tune Rs 1.75 lakh. When he had to pay the credit card bill, he was in a fix as he did not have enough cash to pay it off. So he read the top right hand corner of the bill where it was written 'minimum amount due' and he paid that amount.

As months passed Rahul noticed that his credit card bill was growing each month and soon got out of control. It was not his spending that had inflated the bill but the interest rate on the original bill.

The truth is that credit card interest rates are extremely high i.e. between 36 to 42 per cent per annum. However there are some simple ways to reduce your interest payments.

Here are the six easy ways how you can lower your interest rates on your credit card.

The author is a credit expert with 10 years of experience in personal finance and consumer banking industry and another 7 years in credit bureau sector. Rajiv was instrumental in setting up India's first credit bureau, Credit Information Bureau (India) Limited (CIBIL). He has also worked with Citibank, Canara Bank, HDFC Bank, IDBI Bank and Experian in various capacities.


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1. Aim at paying the maximum possible amount each month

Ignore the 'minimum balance due' and try your best to pay the maximum amount you can. The longer the period of payment, the more the interest amount which will add to your financial burden.

2. Pay when your salary comes in

Do not wait for the 'due date' of the bill; instead make the payment as soon as your salary / income comes in so that you can start reducing your interest payment from that day itself.

It will also keep you better budgeted as you will be left with a lower amount to spend.


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3. Do not use that credit card for further purchases

Put that particular credit card away till the payment on it is complete. Adding new purchases on it will multiply your interest burden as there is no free credit period available on a card where the payment has been rolled over.

4. Ask the bank for a lower rate

At times all it takes to reduce the interest burden is to ask the bank. The bank might reduce the interest rate to a more manageable level once they see that the customer has a good track record and is a valuable customer.

As a sanity check, make sure your CIBIL Report is clean and your CIBIL Score is in top shape.


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5. Take a personal loan

The rate of interest is much lower on a personal loan than what you would pay on the credit card. If you are not able to pay your credit card due, replace the credit card debt with loan products that are cheaper. You can look at personal loans, loan against gold or even loan against property.

6. Convert to EMI payments

Some banks give an option to pay back the dues through equated monthly instalments (EMI). However, make sure that you do not miss a payment or the rate will revert back to the original one.

Banks will offer anywhere between 18 per cent to 24 per cent per annum to their existing customers when they opt for EMI.


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