Student credit card loan repayment may be difficult if not planned properly before taking the loan. Managing finances as a student can be challenging, especially when relying on credit cards to cover expenses. A student credit card can be a helpful tool for building credit and managing short-term financial needs, but it’s important to understand how loan repayment works. If you have a huge bill, you can also get a personal loan to pay off credit card debt. Credit cards usually charge a higher interest rate on EMIs so you need to think twice while setting up EMIs on credit cards.
Table of contents
Student Credit Card Loan Repayment: Interest Rate
Student credit cards usually offer lower credit limits and interest rates than standard cards. However, they still accrue interest if the balance is not paid in full by the due date. Credit card loans, or the balance you carry from month to month, can accumulate interest at high rates. If you convert a big transaction into EMI, the interest rate may be around 20% APR (annual percentage rate). Interest on a credit card is calculated daily based on the balance you carry. If you only make the minimum payment, the remaining balance continues to accrue interest, leading to an ever-increasing debt load.
Also Read: Check here all the major details on SBI Student Credit Card and apply now
Benefits of Timely Credit Card Loan Repayment
It is very important to pay credit card bills on time. It helps you to increase your credit score and also increase your credit limit. Failing to manage student credit card loan repayment can lead to financial trouble like high-interest costs, damage to your credit score, and long-term debt. Check below why paying off your credit card debt should be a priority:
- It is important to avoid interest accumulation. The faster you pay off your balance, the less interest you’ll owe over time.
- Timely repayments help build a strong credit history, which can benefit future financial opportunities such as education loans or car loans.
- Reducing or closing your debt gives you more financial flexibility and less stress.
Repayment Strategies for Student Credit Card Debt
Repaying your student credit card loan requires discipline and planning. Timely payments show that your repayment behaviour is good and then other banks also approve credit cards of higher limits. Check some effective student credit card loan repayment.
Pay More than the Minimum
Always try to pay more than the minimum amount due each month. Even a small increase can reduce the overall interest you pay and help you clear the debt faster. If you have sufficient funds, pay the entire bill amount on or before the due date.
Prioritise High-Interest Debt
If you have multiple debts, focus on repaying the credit card with the highest interest rate first. This is known as the debt avalanche method. Once you pay the bill, you can reuse the amount for other expenses which will be due the next month. This can be a good strategy but don’t make this a habit as your debt will keep increasing. Try to pay the full bill and use the card only for essential expenses.
Use the Debt Snowball Method
If you find motivation in quick wins, focus on paying off smaller balances first, even if they have lower interest rates. As you pay off smaller debts, you’ll gain confidence and momentum to tackle larger ones. This will help you manage expenses effectively and improve your credit score.
Also Read: Planning to pursue overseas education? Check here for some of the best banks offering education loans to study abroad.
What Happens If You Can’t Pay?
Missing payments or defaulting on your credit card loan can have serious consequences. The bank may block your account and your CIBIL score will decrease. You may also be denied loans of any type. Check some of the major consequences below:
- Late fees will be charged and it will be a huge amount. Credit card issuers charge penalties for missed payments.
- The financial charge on retail which is mentioned in your report as ‘Fin Charge on Retail’ will be very high and continue to be charged if you are not making full payments.
- You will suffer continuous damage to your credit score. Late payments are reported to credit bureaus, which can lower your credit score and affect future credit opportunities.
- If you fall too far behind, the credit card company may sell your debt to a collection agency.
Repaying a student credit card loan doesn’t have to be overwhelming. By understanding how interest works, prioritising your repayments, and managing your credit responsibly, you can pay off your balance efficiently. Check some FAQs based on Student Credit Card Loan Repayment below.
FAQs
The best approach is to pay in full or more than the minimum payment each month. This reduces the balance faster and limits interest accumulation.
Interest on credit card debt is calculated daily based on the balance you carry. The higher the balance and interest rate, the more interest accrues.
Missing payments can lead to late fees, a higher interest rate, and a negative impact in your credit score. If you’re struggling to repay, contact your credit card issuer to explore hardship programs or seek help from a credit counsellor to manage your debt.
Limit your credit card usage to essential expenses and keep your credit utilisation below 30% of your limit. This will help you to decrease the debt and save more money.
Yes, using a student credit card can help you build your credit score. You can increase your score by making timely payments and keeping your balance low.
To know more about education loans, the best bank accounts for students, forex and banking experience for global students or international money transfers, reach out to our experts at 1800572126 to help ease your study abroad experience.
Related Blogs
Follow Us on Social Media
