Making timely credit card payments is a way to ensure financial security and provides benefits beyond the mere avoidance of late fees. In addition to improving your credit score, on-time payments may lead to better financial opportunities. The following are some of the many advantages of making your credit card payments on time.
Understanding credit cards
A credit card is a type of plastic card that is issued by a financial organisation and has a limit on how much you can borrow. You can use the money to make purchases and then pay it back later, much like a revolving line of credit. When used properly, credit cards can raise your credit score and provide convenience and benefits.
What are credit card dues?
Your credit card dues are your entire debt owed to your credit card company. This includes the amount paid in principal, the interest charged, and any additional costs that may be applicable, such as late or annual penalties. Severe consequences from missed payments can include raised interest rates, a low credit score, and, in some cases, litigation.
Benefits of paying credit card dues timely
1. Avoid paying costly interest charges: With yearly interest rates sometimes ranging from 35% to 40%, credit cards generally have some of the highest rates in the financial industry. These rates are computed every day on your outstanding balance. Your debt can rapidly grow if you put off payments. On-time payments help you better manage your money and prevent needless interest from building up.
2. Late payment penalties: Late fines are incurred if a person fails to make the minimum payment on their credit card by the due date. One can avoid incurring this penalty by making the minimal amount, but they will still incur interest on whatever is left on the credit card. You may avoid concerning yourself with these extra fees by paying your credit cards on time and in full.
3. Maintain your credit limit: Your bank will set a predetermined limit on your credit card based on the work you do, your income, and your credit score. The available credit will remain intact provided you make your payments in due time, hence giving you easy access to money when you need it.
4. Improve your credit score: A high credit score is determined, by far, by payment history. This means that when you settle credit card bills timely and completely, your credit report will be so much better. This improves the overall credit profile, making the applicant more credit-worthy because this information tells lenders that you’re a reliable borrower.
5. Increased credit limit: Banks may increase the credit limit if you often clear your credit card dues before the due date. That is a lifesaver for big purchases or emergencies when money is needed. And the more credit a borrower has, the higher his credit score because lower utilisation of available credit gives him a better credit score ratio.
Importance of on-time payment’s
Apart from saving you from fines, timely payments of your credit card bills help you set a stable financial future. This helps lower the cost of interest and improves your credit score, thus enabling you to get better loans and high-end credit cards with enticing perks.
In conclusion, small, regular habits will form the basis of a successful financial life, with one of the most crucial being ensuring that you pay off your credit card bills in a timely manner. This also opens up a world of benefits, such as lower loan interest rates and special credit card benefits, besides keeping your finances stable.
As a first step to taking control of your finances and laying the foundations for a more promising and stress-free financial future, put making on-time payments top on your list.
(Note: Using a credit card carries its own set of risks)
