Whether to make your credit card payment in full or just pay the minimum balance may seem like a simple decision, but it holds a significant impact. Not only is this financial decision related to the payment of your bill, but it can also impact your finances.
Clearing your dues in full and on time comes with a number of benefits. From reducing the burden of paying interest to helping you increase your credit score, this decision can help you maintain positive financial health.
5 Benefits of Making Credit Card Payments in Full (On Time)
Here’s a quick rundown of the various advantages of clearing your dues in full:
Helps Build Your Creditworthiness
Did you know that regular payment of your credit card bill on time and in full can help boost your credit score? Yes, that’s right! With a spotless credit history, financial institutions can rest assured of your repayment capability.
And more so, getting credit approval in the future becomes easier. Wondering what a credit score is? Simply put, it’s a numerical summary of your creditworthiness, ranging between 300 and 900. A score closer to 750 or above helps you get hassle-free approvals. In contrast, a score below 600 may delay or reject your loan application.
After all, whether you apply for a credit card or a loan, there is a risk of default for the card issuer or the lender. Remember, credit score isn’t the only factor card issuers assess. There are a few other parameters, too:
- Your income and type of employment
- Your age and residence
- Your credit utilisation ratio
- Your existing credit accounts
Lowers Your Credit Utilisation Ratio (CUR)
Why is the credit card utilisation ratio significant? As a first-time card user, this is a common question you may think of. Before delving into its importance, know what this ratio is all about. This value is calculated based on the amount that you utilise compared to the total sanctioned card limit.
A low CUR demonstrates that you don’t rely on credit heavily to meet your expenses and that you are financially disciplined. Making your credit card payment in full and on time reduces your credit card dues. In turn, it reduces your credit utilisation ratio. Ideally, keeping this ratio below 30% is a smart decision.
Lets You Access Higher Credit Limits
Consistent payment of your bill on time and in full helps build the trust of the credit card issuer. Whenever you need to increase your card limit, you can request the credit card company to increase it. The card issuer may sanction it instantly after assessing your payment history and CUR.
Once your card limit is enhanced, you can use it wisely to tackle your requirements effortlessly. Remember, credit utilisation is a major factor that can help you enjoy higher limits. So, keep a close watch on it.
Avoids Interest Charges
While you can make partial payments or pay the minimum due, the flip side is that issuers levy interest on the unpaid balance after the grace period. You may choose this alternative if you’re facing a financial crunch. So, consider the pros and cons and make an informed decision.
Paying only the minimum due or the partial amount can accumulate interest charges over time, increasing your borrowing costs. Hence, paying your bill in full is an ideal solution to save you money in the long run.
Supports Quick Repayment
This goes without saying that paying your credit card bill in full and on time makes you debt-free earlier. As you make timely payments in full, you clear your bills instantly and manage your repayment without overburdening your finances.
What’s more, some issuers let you access exclusive credit card offers when you make regular bill payments in full and on time. Here’s what you stand to enjoy:
- Cashback on various transactions
- Discounts and offers on purchases
- Extra reward points
- Vouchers and gift cards
Tips to Pay Your Credit Card Bill in Full
Simply follow these simple tips and tricks to make your credit card payment in full:
- Take benefit of the auto-debit facility to reduce the burden of paying the bill manually every month
- Set reminders to avoid missing the due dates of credit card bill payments
- Determine a monthly budget and allocate some funds specifically for your credit card bill
- Avoid utilising your card limit in excess to avoid the burden of a high bill, which can be difficult to repay
Before deciding on the repayment strategy of your credit card, opting for the right credit card is important. To get various attractive perks and enjoy a high credit limit, consider applying for the One Credit Card. You can get up to 5X rewards on top two spends, exciting discounts and offers on shopping and dining, along with easy conversions of your purchases into affordable EMIs.
It also helps you save more as you don’t need to pay any joining fee, annual renewal fee, or reward points redemption charges. Also, with the One Credit Card App, you can manage your card and track your spends seamlessly online. Apply now to get started.