ATM :: Easy ways to reduce the interest payments on your credit card bills

Monday, February 25, 2013 by Rajiv Raj


Rahul Khanna 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 Rs1.75 lacs. When the bill came due, he was in a fix since he did not have that much cash to pay it off. So he read the top right hand corner of the fill where it was written “minimum amount due” and he paid that amount. As the months passed Rahul noticed that his credit card bill was growing each month and it was quite out of was not his spending that had inflated the bill but interest payments on the original bill.

The truth is that credit card interest rates are extremely high i.e. between 36-42% p.a. However there are some simple ways to reduce your interest payments.

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 will add to your financial burden.

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 for spending.

Do not use that credit card for further purchases – Put that particular credit card away till the payment on it complete. Adding on purchases on it will multiple your interest burden as there is no free credit period available on a card where the payment has been rolled over.

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 more manageable level once they see that the customer has a good track record and a valuable customer. As a sanity check, make sure your CIBIL Report is clean and your CIBIL Score is in top shape…so do ask

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.

Convert to EMI payments – Some banks give option to pay back the dues through Equated Monthly Installments (EMI). However, if 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% to 24% p.a. to their existing customers when they opt for EMI.

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