Even with a sharp increase in credit card use, and a user base almost to the tune of 58 million, there are still reservations prevalent among individuals with repayment. Additionally, it is equally essential to utilise a credit card cautiously to make the most of its features and facilities. While caution should always be exercised in using a credit card, a few reservations such as overreaching repayment burden still exist, and are not entirely well-founded. Using a credit card wisely not only enhances cash flow availability but also improves credit score.
Nevertheless, these payment tools come with interest accrual as per the credit card interest rate applicable in case of a delay in bill payment. Card issuers also provide an interest-free period that allows you to make purchases and repay the utilised credit while ensuring efficient management of cash flow.
Here, take a look at how interest-free period of a credit card helps to manage cash flow of the cardholder.
Different methods of using an interest-free period of credit card
In managing the cash flow, the underlying objective is to use the interest-free period judiciously, keeping in mind the steep credit card interest rates. Below are a few such instances –
- Returns in the interest-free period
It is important to take note of returns requested post a purchase transaction is made within the billing cycle. Credit cardholders sometimes carry a misconception that if a transaction has been rescinded, the said amount would not have to be paid on the credit card bill. A refund may likely be delayed by the merchant and impact the bill amount as such a calculation primarily depends on the day when the refund is done.
For instance, an individual makes a particular purchase with the card on 5th August. The statement generation date for the concerned billing cycle is 13the August. Now, the purchase is returned on 8th August. Message received from the merchant mentions that the amount is to be refunded within 7 to 10 business days. Now, if the refund is done within the credit card statement generation date, i.e., the 13th of August, then the transaction amount would not be reflected in the bill and would not have to be paid. It must be noted in this regard, that if you are considering how to get a credit card, among other aspects, the billing cycle should also be noted to make transactions judiciously.
On the contrary, if refund is credited either on or post the statement generation date, then the particular amount has to be paid. The refund will be reflected on the next statement, and adjusted in the subsequent billing cycle, on future expenditure.
- Management of interest-free period on multiple credit cards
If an individual possesses multiple credit cards, then expenditure has to be duly spread across even though the credit card interest rates may differ. If all transactions are undertaken at the onset of the respective billing cycles, the interest-free periods on all those credit cards can be maximised. It is one of the main reasons why credit cards are better than debit cards.
With certain credit cards, such as the Bajaj Finserv RBL Bank SuperCard, interest-free cash withdrawal is also possible against a flat processing fee of 2.5%.
For instance, an individual holds ‘card X’ and ‘card Y’ with respective billing dates as 2nd and 16th of a month. Card X should be used for transactions between 2nd and 16th of the month, whereas card Y is to be used for 17th to 1st. In this manner, the interest-free credit period for both months can be maximised. However, multiple bill dates should be duly noted to avoid any late payment charges.
It is for this reason that you are smarter with a credit card in your pocket than otherwise. Select financial institutions, like Bajaj Finserv, also bring other attractive features and benefits along with an extended interest-free period of up to 50 days to maximise user benefit.
The financial institution also brings pre-approved offer to make financing hassle-free and affordable for customers. These offers are provided on several financial products that include personal loans, credit cards, and business loans. You can check your pre-approved offer by entering basic details such as your name and contact number.
While credit card interest rates are on the higher side and there is an existing negative perception with respect to defaults or late payments, the methods mentioned above can come in handy for credit cardholders. Making purchases at the beginning of the billing cycle not only offers a long duration for interest-free credit utilisation but also frees up your cash for the said period to help manage other expenses.