When you use a credit card, you are given the option to pay off your balance either in full or over time. If you don't pay the full amount by the due date, the remaining balance gets ‘rolled over' to the next billing cycle. This process is known as a credit card rollover. While it lets you carry your debt forward, it also means interest charges start adding up, making your debt more expensive over time.
Understanding how rollovers and interest work is essential to managing your credit card debt effectively.
Here are eight suggested ways to lower credit card interest charges on credit card rollovers:
Consider Balance Transfer
Choose a credit card that offers low interest on balance transfers for a limited time, before your debt gets bigger. Focus on paying off the transferred amount within that offer period, instead of using the card for new purchases.
Improve Credit Score
Increasing your credit score is essential if you wish to begin lowering the annual percentage rate (APR) that lenders offer you on credit card applications. A low credit score could indicate that a borrower is more likely to default on the loan. Raising your credit score could be one strategy to acquire a cheaper interest rate.
Pay Balance In Full
If you don't pay your full credit card bill, interest is charged on the leftover amount. To avoid this, always pay the full bill on time. It is advised to only spend what you can afford to repay.
Negotiate Lower Rate
One easy way to lower your credit card interest is to ask your card company for a rate reduction. Many issuers agree, especially if you have a good payment history and a strong credit score.
Credit Utilisation Ratio
Banks look at your credit limit and how much of it you use to decide your credit card interest rate. Keeping your usage below 40% shows you are managing credit well and can help you get a lower interest rate.
Cash Withdrawal
You have to pay interest if you take out cash from an ATM using your credit card. The interest charged on these advances is usually greater than that charged on regular transactions. It is advised to use your credit card to withdraw cash only in an emergency.
Make Regular Payments
Consider reducing your balance every week or each time you buy anything significant. This lowers the interest charged as well as your average daily balance. You can make several payments in a month with the majority of card providers.
Emphasise High-Interest Debt
If you have multiple credit card balances, focus on paying off the one with the highest interest rate first. Pay the minimum on the others. This helps lower your total interest over time.
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