Paying your credit card bills is a healthy financial behaviour which comes with numerous perks. Credit cards offer a pre-specified line of credit and as such, leaving residual dues on them is equal to non-repayment of an availed amount of credit. On-time credit card bill payment is thus nothing short of vital for any user.
Keeps your credit utilisation ratio low
Paying your bills on time clears debt and keeps the credit utilisation ratio low. Keeping this ratio within 60% will help you improve your CIBIL score. Also, to keep this ratio within 60%, refrain from closing an existing credit card account.
Given below is an example with which you can understand how closing your credit card account affects your credit score.
Suppose you have two credit cards with a total limit of Rs. 2 Lakh (Rs. 1 Lakh each). Now if your balance is Rs. 50,000, it will be divided into two cards which will keep the credit utilisation ratio at 25%.
Now if you close one account after clearing the balance your credit card limit will drop down to Rs. 1 Lakh. If you have a balance of Rs. 50,000, the credit utilisation ratio will be 50%. Sticking to such a limit can help users consider you as a creditworthy borrower.
Helps you avoid interest rate
Making your credit card bill payment within the grace period will help you to avoid late payment fees and interest rate from being imposed. Let us understand the billing cycle of your credit card with an example.
While you read your credit card statement correctly, you will come across two dates termed as bill generation date and payment due date. Suppose your bill generation date is 1st October. The user can benefit from an additional grace period of 20 days to make their payments. Thus, your payment due date will be 21st October. Now, your next bill generation date will be on 1st November.
For the transactions after 1st October, the user can enjoy 30 days till the next bill is generated (1st November) and an additional 20 days (21st November) within which you will have to make your payment. In total, the user gets to enjoy 50 days to pay the bill out of which 30 days to pay your bill and an additional 20 days as a grace period.
Clears your credit card balance
Consider clearing your credit card balance on time. Such payments will help you maintain your credit card limit with which you can meet several emergencies.
Clearing the debts on time will also help you avail emergency advances. The Bajaj Card is one such card with which you can avail emergency loans at 0% interest rate for up to 90 days. You also enjoy easy EMI options and can repay your loan in 3 instalments.
Bajaj Finserv also provides pre-approved offers on credit cards, which reduces the hassle and time taken by the application process. These offers are also available on home loans, personal loans, business loans, as well as on numerous other financial products. Share only your name and contact number to take a look at your pre-approved offer.
Improves your CIBIL score
While you make your credit card bill payment on time, you get to improve your CIBIL score. Holding a higher CIBIL score of 750 or above will secure the chances of availing advances with ease.
Assists you to avoid late payment charges
While you repay your credit card debt on time, you get to avoid hefty late payment charges and keep your bill amount low and reduce the strain on your pocket.
Credit cards also offer you a bonus in the form of reward points. You can redeem these reward points at the time of your purchases. In case you are a first-time user, you get to enjoy a welcome bonus of Rs. 20,000. These welcome bonus and reward points on your credit card helps you to keep your bill low and avoid late payment.