Credit card hack: Buy now, pay later (interest-free!)
What's the story
Credit cards have become a staple for many Indian consumers, providing cashless convenience and perks such as rewards, cashback, and interest-free periods. The last one, although frequently ignored, can be a potent tool if utilized judiciously. This article delves into the concept of interest-free periods on credit cards and the strategies to maximize their benefits.
Basics
What is an interest-free period?
A grace period on credit cards is a timeframe during which purchases are not subject to interest. This period usually ranges from 20 to 50 days depending on the billing cycle and the date of purchase. This benefit is only applicable if you pay off the entire balance by the due date. If not, interest is applied to the outstanding balance.
Strategy
Maximizing benefits
By timing your purchases just after your billing cycle begins, you can take nearly full advantage of the month-long interest-free period plus the grace period before payment is due for those purchases. This is particularly beneficial for big-ticket items as you get the maximum window to pay off the dues without shelling out a penny in interest.
Caution
Avoiding common pitfalls
While it's advantageous to utilize the interest-free period, it's crucial to not fall into the trap of overspending. Because purchases do not incur immediate interest during this period, it can be easy to overspend. By monitoring your expenses and exercising discipline in your spending habits, you can ensure that you stay within your budget and avoid the pitfalls of debt.
Insight
Understanding billing cycles
The billing cycle of a credit card is the period during which charges are accumulated for billing. It is usually around 30 days, although it can be different for different cards and issuers. Knowing when your billing cycle begins and ends is important because it determines how long each purchase stays interest-free. You can find this info on your monthly statement or by calling your credit card issuer.
Discipline
Making timely payments
To truly take advantage of an interest-free period, on-time payments are a must. Consider setting up reminders or even automating payments through net banking to make sure you never miss a due date. Keep in mind that even a single late payment can lead to significant late fees and finance charges, not to mention potential damage to your credit score.