Category: Personal Finance

Clear your credit card dues fully within the deadline

As well as being the most expensive borrowing alternative, a credit card is a means of free credit. Which means that there is no fee on the credit provided by the bank when you settle credit card payments in full within the time limit. That being said, if the time limit is skipped, not only will you be met with a penalty, but an exceptionally high interest rate on the outstanding balance will also be levied. By spending a minimum of 5 percent of the outstanding amount, you can carry over the balance, but be mentally prepared to pay out 3-4 percent of the due amount each month. It is a wise decision to automate reimbursement for your credit card bill so that the lender does not, even though you skip or miss the last date of payment.

Manage your expenses better, but how?

Like credit cards provide varying advantages and rewards, for specific purposes, you can choose to keep several credit cards. For instance, you may have one reward credit card that offers more yummy treats, another that offers more dining rewards, and another that doesn’t incur foreign transaction fees. It’s easy to keep registering for credit cards with credit card issuers continually launching new credit cards, with higher incentives and longer discount intervals. In fact, there is a term for individuals who regularly sign up for credit cards for rewards to receive the registration reward. To stop slipping into debt and credit card distress, there is a method to toss credit cards that must be carefully pursued. It will also help to keep those finances apart by getting several credit cards. For instance, for personal expenses, you might use one credit card and another credit card for business activity.

Make the best use of free credit period

The interest-free period on transactions is also maximised across several cards. Using a card where the payment period is the maximum, as a guidance. Assume you have two cards of billing cycles that finish every month on the 15th and the 30th. Use the first card to shop before the mid of the month, and then turn to the second card if you have several credit cards. Turn back after the end of that month to the first card, this will offer up to 40-45 days of interest-free credit for you. One more benefit is that, if you are experiencing a cash pinch, you can transfer the balance from one card to another. Many lenders enable you to transfer outstanding bills for the first 1-2 months and some do not even bill for it.

Go for EMIs if required

By the due date, paying off the entire bill is certainly the right option to go for. And that you can switch your remaining dues into easy EMIs if you are experiencing a scramble. The interest payable is 18-24 percent a year, but as you transfer the balance, it still comes out more than the 3-4 percent you spend per month. You ought to do it in the right manner to reap the perks synonymous with credit cards, such as easy shopping and creating a credit line. Credit card payments can be covered in different forms including paying the full amount, paying the minimum amount and paying interest on the balance or converting the whole or half payment into an EMI. EMIs will help you get the best of it if you pay more than what you can compensate for at one go. Credit Card EMIs can be used at any time, unlike personal loans, if you have the EMI service available on your card and enough balance to cover it.

Don’t forget about your credit score

Your credit score is influenced by how you use your card and when you settle your outstanding dues. Don’t cheapen your credit record by skipping a due date. When you go for a shopping, stay to a spending target. Before you use your card, especially for high-value transactions, map out a repayment schedule. You might not be worrying about what your lenders are doing as you swipe your credit card to ensure that they recover the amount they just credited to you. But, be sure to secure your credit score when you plan your next payment. Your credit score is a three-digit number used by lenders to determine how likely your debts are to be repaid. A high score will allow you to apply for the lowest interest rates and allow you to lend money for transactions.

What do you mean by sweep-in fixed deposit?

Banks support their customers with a sweep-in fixed deposit facility in which the saving account of the customer is directly linked to a fixed deposit account. The savings account owner has to set a particular money transfer cap within a specific tenure period to allow use of this service (the term of the deposit is generally one year, but it can go up to a limit of 5 years and can vary from bank to bank and even the rate of interest can differ respectively. The excess balance is instantly transferred to the linked fixed deposit account when the amount in the savings account rises over the cap.

For e.g., for one year, you’ve linked your savings account with your FD account having sweep in facility. For e.g., for one year, you’ve linked your savings account with your FD account sweep. You will also have to raise the cap above which any balance will automatically be credited to the FD account when you opt for the sweep-in feature. Deposits with sweep in facility are normally only accessible to premium account holders for longer periods, such as 181 days or 366 days. The interest might not be compounded in certain situations, though.

What do you mean by flexi-fixed deposit?

It is a special form of deposit strategy that banks provide to the customers. The depositor is allowed to manually transfer money to their bank account in the flexi-fixed deposit. Both the stability of savings accounts and the high yields of fixed deposits are provided to the holder of a flexi fixed deposit account. As stated, the account holder has to manually release the deposit for the required tenure in a flexi deposit, whereas any balance beyond a limit is swept into a fixed deposit in a sweep in deposits. In comparison, amounts are immediately swept out in the event of a deposit sweep, without any cost, when the total balance in the savings account is low.

How Can I Make The Best Use Of Both The Facilities?

Both sweep-in and flexi-fixed deposits can help you to cover emergency funds as they fall with liquidity and have better returns. Although deposit sweep offers flexibility, it can only be preferred if the depositor has made minimum transactions and he or she is willing to retain securities for longer periods. Although deposit sweep offers flexibility, it can only be preferred if the depositor is willing to retain securities for longer periods and not have too many transactions. Depositors should read the terms and conditions of the minimum limit, the approach used for reversing funds, along with other considerations, before saving or opting to make deposits. Banks have various systems for their auto-sweep service, and in order to exploit them successfully, it is important to grasp them explicitly. First of all, while some banks which enable you to adjust the minimum average balance above which the money will be transferred to an FD in your savings account, most banks have a specified FD minimum average balance and maximum cap.

The facility should be used wisely, as most banks do not impose a penalty for breaking the auto-sweep FDs. It is best not to prefer your savings/salary account as an auto-sweep. It is suggested because the amount above the minimum average balance will be transferred into one or more FDs each time your money hits the auto-sweep savings account. The balance in the savings account is drained over the month, when you pay for various expenditures, and any of the FDs will be liquidated to transfer the funds into the auto-sweep savings account. If you sometimes make withdrawals from the FD, no matter how much you deposited into the account, you will miss out the interest. Therefore, you can set up a sweep-in or flexi fixed deposit facility for a non-primary savings account to generate a fund that you can fall into only during crises in order to reap decent returns on your savings account deposits.