From interest rates to EMIs: Navigating Credit Card costs

[Purvi Dalvi]

Credit Cards are undeniably convenient, offering a quick and easy way to make purchases immediately without parting with your cash. However, hidden beneath the charm of this plastic wonder lies various costs that can quickly escalate if not managed properly. From interest rates to various fees, understanding the cost of using a Credit Card is crucial for responsible financial management. A tool that can significantly help in this process is a Credit Card EMI calculator.

Understanding interest rates

Interest rates are the most noteworthy hidden cost of Credit Cards. While many cards offer an interest-free period, typically 45 to 55 days, any balance remaining unpaid after this period attracts interest. These interest rates may be steep, ranging between 18% and 30% annually. Many people need to realise how quickly these charges can add up, especially if only the minimum payment is made each month.

When there is a balance on your Credit Card, the interest is calculated daily, which means that even a tiny unpaid balance can increase if left unchecked. This is why you need to be aware of your Credit Card's rate and try to pay off the balance each month. If you cannot do so, you need to have a plan for managing this debt before it goes out of control.

Additional hidden costs

Besides interest rates, other Credit Card fees can get on you. For example, Credit Cards charge a yearly fee, which ranges from a low amount to several hundred rupees, depending on the perks offered by the card. There may also be charges for late payments, exceeding your credit limit, or even for using your card abroad. These fees add up over time, making your Credit Card more expensive than you initially expected.

Role of a Credit Card EMI calculator

Given the potential costs associated with Credit Cards, you should budget effectively and be aware of how much your repayments will be if you decide to convert your purchases into Equated Monthly Instalments. This is where a Credit Card EMI calculator becomes a useful tool. It lets you input the amount you have spent, card interest rates, and the term you wish to repay.

The calculator then provides the EMI amount you need to pay each month, and a breakdown of the total interest owed over the repayment period.

Conclusion

Credit Cards can be a useful financial tool when used strategically, but they come with hidden costs that can catch you unprepared. Understanding these costs, particularly interest rates, and using tools like a Credit Card EMI calculator helps you steer the difficulties of Credit Card debt. By doing so, you can enjoy the convenience of Credit Cards while keeping your finances on track.