Managing your credit card payments properly is a key factor in ensuring that you are not saddled with high interest costs at the end of the day.
Normal management processes require that you be able to pay the amount that has been spent on the credit card by the due date. There are also occasions when one would want to be extra careful and prepay some amounts. This, as many people are discovering, might hit a roadblock with the bank, as they might either not accept the extra amount or return it to the cardholder.
Here is how this kind of situation should be identified and managed.
Extra Payments
Many of the credit card holders would want to be extra safe when they have foreign travel or a large expense coming up.
What they do in such situations is to go and pay an extra amount on the credit card before the expense is made so that they are able to use the credit card freely when needed without much worry.
Banks, on their part, are not in favour of such steps because they want the cardholder to use amounts only up to the credit limit that they have been given. Depositing an extra amount leads to a larger credit limit, plus it also raises other red flags, especially when the expenses are incurred on foreign spends using the credit card.
Banks, thus, restrict the extra payments on their apps, or they try to refund the excess amount back to the cardholder.
Genuine Reasons
There can be several genuine reasons why the individual might want to pay some amounts before the due date or even before the bill is generated.
One could be that they might be travelling on the due date of the bill payment, so they might want to finish this job earlier. The second could also be that they want to open up their credit lines so that they are able to use the amounts when they are travelling.
This is where an individual has to make a distinction between the type of payment. An additional payment that will take the credit limit over the sanctioned amount might not be permitted by the bank. However, the cardholder can at least ensure that they are able to achieve their goals in a proper manner.
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Payment Against Expenses
The cardholder would have made some expenses on the credit card, and it could be that the bill due date is some time away, but this does not stop them from paying the amounts that they have already spent. This would not be a violation of the condition that the bank will not accept extra payments, as the cardholder is just paying back the amount spent and freeing up the credit limit that has already been sanctioned.
This is a way in which they can ensure that they have the necessary credit limit when they actually want to make the spends. The amount that they have already spent is available either by looking at the SMS notifications that come after every spend or by looking at the details, which are visible either online or on the bank's app.
This kind of payment can be made multiple times if there are more spends and the credit limit needs to be opened up again.
Meeting Due Date
One factor that has to be followed is that in the credit card cycle, the amount of the bill that is generated at the end of the month has to be paid.
This is crucial because when different payments are made ad hoc, there is a chance that the full amount of the bill is not paid, and this can lead to a high cost in the form of an interest levy starting after the due date.
What this means is that if the bill for a period is a certain amount, say, it turns out to be Rs 1.85 lakh, then all the payments made before the due date have to total at least Rs 1.85 lakh. If this does not happen, then it will be considered that the cardholder has made a partial payment. This is one thing to take care of because when part payments are made, there are chances of making a small mistake.
Arnav Pandya is the founder of Moneyeduschool
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