By definition, a credit card is a payment card issued to users to enable the cardholder to pay a merchant for goods and services based on the cardholder’s promise to the card issuer to pay them for the amounts so paid plus the other agreed charges. Paying through a credit card can prove to be a blessing if used correctly. Especially if you are new to credit then a credit card might be the best option for you to build a credit history. Also, there are numerable credit cards available today that offer a wide range of offers, discounts and deals.

But as the experts say, you should make every financial decision very carefully and do what’s best for your money. So you should analyse each aspect of the matter thoroughly. To ease your work, here are a few credit card doubts answered:

How much should you pay on your credit card bill?

You can choose to pay either the balance back all at once or some amount regularly, over time, depending on the terms of your credit card provider. Every month you have to figure out what amount you should pay.

In a perfect world, you would be able to pay your balance in full every month. If you can, you should definitely go for it as this has a few benefits of its own-

-Your entire credit limit will be available for new purchases.
-You can avoid paying interest on the balance.
-You will never be in a credit card debt.

At the very least, while paying through a credit card, you should pay the minimum on your credit cards every month to avoid paying a late fee on the card and to avoid a late payment on your credit report.

Alternatively, you can choose to pay smaller, monthly payments every month until the balance amount is repaid in full. This amount would be in between the full and minimum amount. Analyse your income and expenditure to decide how much you can pay without getting into trouble.

When should you pay your credit card bill?

A billing cycle of a credit card can last anywhere between 29 and 31 days. The last day of this cycle is called the statement closing date. The balance you have on this day is usually the balance that your credit card issuer reports to the credit bureaus. So you can choose to pay your dues before this to ensure a lower credit card balance. But the closing date isn’t the same as your due date as payment isn’t due until the end of a grace period. So the due date is the day your grace period ends. You should pay off your credit card by the due date, especially if you pay your entire balance. Track your credit utilization ratio and keep it as low as possible to protect your credit score.

What is minimum payment?

Minimum payment is the least amount of money that you need to pay on your credit card statement each month. You should check the “terms and conditions” of your credit card to understand how your minimum payment is calculated. Although, the industry standard is to calculate the minimum as all fees and interest due that month plus 1 per cent of the principal amount owed.

What is 0% APR?

APR stands for annual percentage rate. 0% APR means that you do not have to pay interest on your purchases for a specific amount of time. According to what the credit card provider is offering, the duration of 0% APR can last from six months to over a year.

What is grace period on credit cards?

A grace period is a duration between the end of your credit card’s billing cycle and the date when your payment is due. Commonly, when you pay your balance in full and have no outstanding advances, you will not be charged interest on any new purchases that you make during the grace period.

What is the meaning of Current balance, Available Credit and Credit Card Limit?

Current balance: The amount you currently owe on your card account.
Available credit: The amount that you currently have available to spend. This would be the difference between the Credit Card Limit and The Current Balance.
Credit Card Limit: The maximum amount of credit available on your card account.

How can you maximize your credit score using a credit card?

The first way to maximize your credit score using your credit card is to never delay payments. Pay off your balances on time and if you can, pay them in full. Secondly, keep the credit utilization ratio low. The recommended number is less than 30%. This helps you in increasing your creditworthiness and thereby your credit score.

Paying through a credit card can prove to be beneficial in many ways. The only thing you need to ensure is to use it wisely. When you take care of a few small details, you can use your credit card to even increase your credit score. If you are facing any difficulty in getting approved for a credit card, you can check out these ways to increase your chances of credit card approval.

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