What is credit Interest?
Credit cards are personalized cards given to consumers by banks that can be used to pay for various things in the place of cash. When a payment is made with a credit card, the amount is withdrawn from a bank. At the same time, an interest on the amount is added by the bank. At the end of a certain period, the card holders would be required to repay the money they spent plus the interest. This generates revenue for the bank which is called credit interest.
The credit interest charged varies from one card to another. These interest rates depend on a number of factors such as the resources the bank has at its disposal, the cost of the administration, your credit history and various other parameters. The value of the credit interest can be found out from the monthly credit card bills that the banks send to their customers. It can also be found out directly from the bank’s customer service.
Generally all banks allow for a grace period of 30 days and sometimes an additional 3-5 days for their customers to repay their bills. If the money is repaid within this period, the customers are not required to pay a credit interest. After the grace period is over, the percentage interest rate will be multiplied by the balance and will continue to grow for every single day you delay. Therefore simply paying bills on time alone will lower interests and also earn you a good credit that in turn can help in lowering annual percentage credit interest rates in the future.
When you own a credit card with high credit
interest and if you have a good credit history
, you can always approach the customer service department of the bank and request to have your annual credit interest rate reduced. Most banks agree to this when customers with good credit argue their points.
However if the banks do not agree, you can always cancel the card and get a new one. Since many cards offer a zero percent interest for an initial period and then reduced credit interests for an extended period after that, this could help in saving a lot of money.
Another way to save some money is to ensure that the entire balance is paid off every month. Many people simply choose to pay off the minimum required balance every month and their remaining balance keeps on increasing. Since the credit interest they have to pay is the product
of the percentage interest and the balance, the interest also keeps on accumulating as the balance accrues.
Despite the few disadvantages, it is good practice to have at least one credit card. By using the card frugally and repaying all the credit on time, you can develop a good credit history
that can help you in many ways. Getting the first credit card might prove to be difficult. However when you already have one with a good credit history, it is easier to get another card with lower credit interests.