Monthly credit card payment is not something to take lightly.

Monthly credit card payment is not something to take lightly.

We cannot agree more on the creation of credit card is amazing yet terrifying. The ideology of having a credit card is “cashless transaction”, which often leads to the illusion of “spend before you pay” in Hong Kong consumers. You may realize the nightmare that credit cards could bring us, but in fact, are you actually doing the right thing? You have basically started drowning in debt when you first applied for school loan or owning your first university credit cards. Every person in Hong Kong own 2.4 credit cards on average, based on a 7.17 million total population (including non-adults) in Hong Kong. You might think that you need 3 different credit cards for dining, shopping and cash back, but having at least 2 credit cards makes you even deeper in debt. To cope with this situation and be safe from extra debts, here we have tips on the reasons why you must pay your credit cards on time.

No late fee

Not getting your credit card paid on time will be categorised as a missed payment by banks. Automatically a late fee will be charged. Late fee is usually cost 5% of minimum payment of a credit card or an amount set by the bank. As a result, you end up paying extra minimum amount of HK$ 50.  Remind yourself by setting reminders on calendar, pay everything in advance of few days to avoid any fail transactions or holidays! Thus, if you are out of country and unable to pay the bill on time, you can always phone your bank and keep them informed. They can be very considerate and will not charge you on a late fee if you have always paid your bills on time.

Avoid high interest rate

Not only late fee will be charged if you missed a payment, higher interest will be implied. Interest is paid to bank for mortgages and personal loans for lending you money. The name credit card is derived from paying things on credit using a card, using it for retail merchandises and purchases. The basic interest per annum for banks in Hong Kong is ranging from 30%- 35%, and overdue interest rate will be added 4% over the basic interest rate. In a normal situation, interest fee will be forfeited if you make the full payment before the due date. In another words, you will be paying interest per annum on your unsettled cards bills every time you choose not to make full payment.

Keep monthly payment low

Strategy to keep the payment low every month is by pay the full amount every month! It may be always the better idea to pay the minimum amount instead of missing a payment when you are in short of money, but never make it a habit. By paying the minimum amount in a few months, you will be shocked how much debt you have accumulated over the past few months. Remember, always pay your full cards bill monthly as a habit, by this your bill will be consistent every month.

Improve credit score

If you own a credit card then you are automatically registered in the credit scoring system. Credit scoring system is a database that can be access by banks and authorities recording your credit reports. All the repayment of your personal loans, mortgages, school loans and credit cards will be recorded here. For example, when you apply for a mortgage, a bank will evaluate your credit scoring. You are most likely to get the mortgage if you are a creditworthy person who always pays bill and repayment on time. While credit cards is one of the most influential factor in your credit scoring profile, because you use it on a daily basis. Let’s say, you are paying your credit card bill by writing a check, amount due is HK$ 1100, but you wanted to round it up to HK$1000 just because you don’t feel willing enough to pay the full amount. Please note that by this simple act your credit scoring has already been affected. In addition, maintaining a good credit scoring banks may offer you a lower interest in return!