A credit card is a credit facility that has become a prominent part of a person’s financial life. They provide various benefits, like rewards points, convenient shopping experiences, easy online payments, etc. And managing the credit card bill payments is the cardholder’s responsibility to avail the most benefits of their credit card.
Paying your credit card bill on time is crucial to managing finances properly. Otherwise, it can lead to serious consequences, and you might have a huge debt burden. Plus, it could impact the credit score.
Try to use the payment strategy for credit card bills to avoid such trouble. One way is to pay the credit card bill every time you purchase. However, such an approach may only be suited for some people. The ideal payment strategy must be individualized and depend on the person’s financial situation.
The question is, should someone make their credit card bill payments after each purchase? The article below will answer this question.
Understanding Credit Against Debit
If a person struggles with money management, paying credit card bills after each purchase is the way to go. This way, you can avoid dealing with the due dates of credit card bills and debt accumulation. It implies that you should use your credit card as a debit card.
But this would expose you to only some of the benefits of a credit card. To understand the benefits of a credit card, knowing “what is the difference between a credit card and a debit card” is essential.
- While a debit card directly deducts money from your savings or current accounts, money is borrowed from a bank up to a credit limit when using a credit card.
- A debit card restricts you from spending more than the number of funds you have in the account, while a credit card lets you borrow up to a maximum credit limit.
- One stark difference is the cyclic nature of credit cards when bills are generated at regular intervals upon which they need to be paid. Failure to pay credit card bills can result in piled-up interest and other charges on the due amount. Well, this is not the case with your debit card.
- Since debit card usage leads to a depletion of disposable cash, they do not aid in building a credit score. On the other hand, credit cards have more offers and rewards than debit cards, and their use doesn’t immediately affect the cash in the bank account. Moreover, credit card usage bumps up your credit score.
More Pointers to Keep in Mind
Apart from the points mentioned above, a person can also use the following pointers to create an effective payment strategy for their credit card:
- Creating EMIs of bill payments: If the outstanding amount is significant, a person may convert it into an EMI, considering the processing fee for the option.
- Understand billing cycle and grace periods: Credit card users should know about their billing cycle and grace period. By managing spending as per the billing cycle and grace period, you can avail the benefits of the interest-free period and still be timely on bill payments.
- Credit Utilisation Rate: Credit Utilisation is the total debt ratio to the total credit limit. Paying credit card bills is a major factor contributing to credit score. Paying bills immediately after purchase will not contribute to the outstanding bills.
Conclusion
While Paying card bills after each purchase may be one way. But there are various other ways to create an effective strategy keeping the due date in mind. The other factors that one may need to consider are interest rates, charges, and fees.
Automatic credit card bill payments may also be set up to avoid missing deadlines. This ensures payment is made on or before the due date. The payment strategy may differ from person to person, but the concept of timely payment and maintaining a good credit score applies to all.
