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Credit cards are widely considered as one of the most beneficial financial tools. A credit card can substantially increase the purchasing power of an individual. The user can make purchases on credit and repay the amount interest-free before the buffer period ends.
A quick look into the Indian credit card market
- 27% – Growth in numbers of credit cards in circulation.
- 48.9 million – Number of credit cards until May 2019.
- Rs. 6.07 Lakh Crore – Amount of transactions using credit cards in the Financial Year 2018 – 19.
- 30% – Weight of credit repayment history factored during the calculation of credit score.
The wide usage of credit cards can also be attested to improved infrastructure, bolstered by online credit card payment. Such online features have made credit card payments even more convenient for users and helped them make timely payments easier.
Advantages of credit card payment before the buffer or grace period
Alongside online credit card payments, there are several other factors which have contributed towards the double-digit growth of credit card users. Some financial institutions have also come on record to state that they have been issuing approximately 1 million new cards every month.
A host of factors foment such growth. These factors largely constitute timely credit card payments. Here is a list of early payment benefits –
Improved credit score
A CIBIL score is the quantitative representation of your creditworthiness. It reflects how responsible you are as a borrower and determines your value. Credit score, on that account, is an essential instrument to develop a healthy credit score. When you make timely payments consistently, the same is reflected in your CIBIL score. As mentioned earlier, CIBIL and other credit rating organisations weigh in an individual’s payment history to determine his/her score. It is one of the many ways how you can use a credit card to improve your credit score.
When you delay your payments, lenders report the same to these organisations, wherein they mark you accordingly. In most cases, lenders report when payment delinquency exceeds 60 days.
Avoid interest payment
Timely repayments in full of your credit card bills allow you to avoid interest payment on your transactions. Lenders set a grace period, within which you are liable to repay your dues. Defaulting to pay within such period would empower the lenders to levy interest on your due bill. In most cases, these interest rates are considerably high, depending on the lender. In case you are unaware of your grace period, contact the respective credit card customer care to learn it.
Free your line of credit
In layman’s terms, line of credit is the credit limit you are allowed on your card on a monthly basis. When you make transactions through your card, it reduces your line of credit. Lenders do not renew your limit until you have paid your dues.
Thus, when you make offline or online credit card payments before the grace or buffer period, it frees your line of credit and makes room for additional transactions within that period. It is one of the ways how you can use a credit card wisely to your advantage.
Manage credit utilisation ratio
A credit utilisation ratio is the percentage of credit you use out of the pre-determined limit. Most financial experts advise keeping your utilisation ratio within 60% for each credit card. When you repay your dues in prior, it allows you to manage this ratio effectively, which in turn reflects well on your credit score.
You can also opt for an additional credit card to keep your total utilisation ratio within 30%.
Online card payments, along with several other benefits, have made a credit card the ideal instrument for the current generation of working individuals. Credit cards such as the Bajaj Finserv RBL SuperCard come with several lucrative features for comprehensive usage and benefits for the user. Maintain a CIBIL score around or above 750 to avail such a feature-rich credit card.
