Credit cards provide an easy way to make purchases without depleting your cash. Of course, credit card companies want to earn profits on these credit accounts, so they charge interest. Paying a card’s balance promptly helps the account holder save money. So, when and how should you pay off the credit card entirely?
Interest Explained
what is interest charge on credit card accounts? As SoFi notes, interest is part of the annual percentage rate, and it reflects the costs associated with using a credit card. If the annual interest rate is 8.9%, that is the amount assessed on the unpaid balance.
Paying the Entire Balance on a Credit Card
A credit card company usually provides a grace period for paying the card off without assessed interest. Paying off the balance each month typically allows someone to avoid paying interest. Any balance that carries over to the next month will suffer an interest assessment. Anyone unable to pay the entire balance off should pay as much as possible when the goal is to pay less interest.
Terms and Additional Fees
Regarding grace periods, terms vary among the different cards. Credit card account holders can review the terms and conditions to determine if a grace period exists. They could also ascertain whether there are other costs, such as annual fees, cash advance assessments, and more.
The Payoff Amount
A credit card account commonly lists the statement balance in the current balance. When making a payment, look at the current balance to determine how many charges are currently assessed. Be mindful that the balance reflects only completed charges, and there may be pending ones.
Once pending charges become completed, they appear in the current balance. Remember, making multiple payments in a single month is possible, and doing so could be easy when using an app to schedule the payments.
The Common Ways to Pay a Credit Card
Account-holders may find several ways to pay a credit card balance. The traditional method of mailing the payment – via check or money order – remains, and credit card companies may send a statement in the mail and a return envelope. Other less cumbersome methods are available, such as making an ACH transfer by connecting a checking account to the card and setting up an immediate or scheduled payment.
Other Ways to Pay a Credit Card
In-person payments are sometimes possible. When a bank or credit union issues the card, visiting the branch and making a cash, check, or money order payment may work. Some may opt to use a money transfer service, and others could transfer the balance to another credit card. Transferring from one card to another often serves to move the balance to an account with lower interest rates.
Pay by the Due Date
Paying by the due date is essential to keeping costs down. Late payments might come with added penalties and fees. Sometimes, the credit card company could raise interest rates on those who pay late.
Credit card holders may benefit from paying their cards on time to reduce interest costs. There are several ways someone can pay their credit card balance.
