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Credit cards are a confusing form of currency for many. People tend to get overwhelmed with credit management and tend to either shy away from using the card or use it incorrectly. There are moments where a majority of us may use the credit card out of impulse or indulgence while sometimes we may use it during an emergency. Whatever maybe the reason for swiping the card, the below article outlines the benefits of using a balance transfer plan or an easy pay instalment plan as opposed to the standard mode of paying a certain amount of the bill and carrying the remaining amount forward at a hefty interest rate

How to avoid heavy credit card interest rates

Balance Transfer Options:

It is when one transfers the outstanding credit card debt from one card to a card from another bank. Balance transfers require the user to pay a small one time handling fee but their benefit lies in the fact that majority of the banks offer a 0% interest rate or a very small rate of interest with no upfront handling fee. This option is especially helpful when one is lagging behind on their monthly payments with the interest rates building and the credit rating declining. One should keep in mind that the balance transfer programs only offer a low or zero interest rate for a limited time and any balance that gets carried over this period is subject to high interest rates. So one should plan carefully while utilizing this option and ensure to pay off the balance amount before the period expires.

Easy Payment Plan or EPP:

This type of plan goes by different terms such as flexi pay or flexi payment plans. They basically break up a larger purchase into smaller amounts for a specific tenure option that is available and varies from bank to bank. The benefit of this option is that larger purchase of items such as laptops that can run into the thousands will be broken down into small amounts for a specified tenure with or without a onetime upfront handling fee. Such smaller payments avoid the hefty interest rates that come with standard monthly payments and helps ease the financial burden of the cardholder. Unlike a balance transfer plan, the EPP can be opted for on the same card and does not require a different credit card issued by a different bank.

Differences between EPP and Balance Transfer:

Both programs convert credit card dues into smaller and easier to handle amounts. In a balance transfer plan the accumulated purchases of different bill amounts can be transferred to a different card provided they meet the minimum balance transfer amount. For example, bill amounts of RM 300, RM 400, RM 250 and RM 450 can be accumulated and transferred as they are above the RM 1000 limit that most banks set. Whereas in an EPP only those purchases that are above RM 500 or RM 1000(varies from bank to bank) in a single receipt can be converted leaving out the smaller purchases. Fr example a bill of RM 1200 in a single receipt can be converted but bills amounting to RM 200 or RM 300 cannot.

Which to Choose:

The choice of balance transfer plans or EPP varies and is subject to an individual’s financial status. One should choose the facility which charges the lowest interest rate that allows them to reign in their debt. Sometimes both options charge a fee for early settlement which can bring up the cost to that of paying the bills through the standard way. Most of the times reward points and other benefits do not pay out on such plans which can dent the benefits of the card. Also both options charge a penalty for late payments that if one ignores can easily build up the debt.

Regardless of the choice, the options still reduce one’s debt faster than the standard mode of paying only when coupled with a disciplined repayment routine. If repayment routines are not maintained, they can not only increase the debt but ruin one’s credit rating.

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