Credit cards are useful financial tools for making high-value purchases, such as expensive electrical appliances, flagship mobile phones, or laptops. Most people pay off their credit card debts the following month. However, if you cannot do so, then the high-value transaction can be converted into monthly equated instalments (EMIS). These EMIs may come with a higher interest rate than loans. One way to avoid such high EMIs is to use an EMI calculator.
Understanding the Burden of Credit Card Interest
Most banks charge anywhere from 30 to 45% interest on pending balances of their credit cards. While these cards may be free to apply for, they may bring a considerable interest burden. If you have chosen to free credit card apply, then you must know that there are two ways to repay credit card dues to avoid credit card interest.
- Pay Minimum Due
You can pay the bare minimum due if you are short on funds when paying your credit card dues. This will add the remaining amount to next month’s credit card bill with interest.
- Convert into EMIs
A more sensible way is to convert the transaction into EMIs, which you can pay consistently monthly. While this also comes with some interest each month, it may not feel like a big burden on your wallet since you are not paying the lump sum at once.
You can use an EMI calculator to determine which route is better for you. You simply need to input the loan amount (the total value of your credit card statement), the interest charged by the bank, and the duration for which you plan to pay the credit card due (known as the loan tenure).
This can give you an accurate estimate of your monthly EMI burden. Using this estimate, you can choose whether to pay off the debt in one lump sum next month or parts over several months.
- Controlled Spending
If you have applied for and received a free credit card, you must know that with it comes significant financial responsibility. This means you ought to control your spending despite having a credit card for free. This can easily be done using an EMI calculator.
The key is always using an EMI calculator to see your monthly burden if you cannot pay off the credit card bill the next month. Here is a step-by-step process to do this.
- Whenever you are about to make a high-value purchase, open any readily available online EMI calculator.
- Start by putting in the loan amount. In this case, this will be the amount of the product you are about to purchase.
- Then, you need to enter the interest rate. This will be the interest rate your credit card issuing institution (either a bank or a non-banking financial company) charges.
- Finally, put in the loan tenure. This will be when you plan to pay off the credit card due.
- If the resultant EMIs are too much to bear each month, you may want to reconsider the high-value purchase.
- Conversely, you may proceed with the high-value purchase if the resultant EMIs are within your monthly budget.
Also Read: Best Stocks to Buy This Month
Keeping these in mind, you can opt for a free credit card apply for it, use it, and then pay off the dues in easy EMIs.
What is the best way to avoid high credit card interest?
Apart from controlled spending, you can also plan strategically to avoid high credit card interest. Using an EMI calculator to estimate the EMIs, you can choose the most affordable loan tenure to convert a high-value purchase into EMIs. So, if you have access to free credit card apply options, then you can safely apply for such a card and use it responsibly.