How to Avoid Paying Interest on Credit Cards: 5 Proven Strategies

If you are looking for tips on avoiding paying Interest on Credit Cards, you’ve landed at the right place.

Reducing credit card debt is essential, because it keeps growing when making purchases, especially when you already have debt. According to the Nerdwallet Survey, U.S. households pay an average annual credit card debt of $1,000 in interest.

Credit card interest sums up everything you buy with your credit card in the form of extra charges, but it can be reduced by following some techniques. These strategies are essential to implement right now to avoid higher interest rates over time.

According to the data of the Board of Governors of the Federal Reserve, the average interest rate on credit cards is 22.16% as of May 2023, which was 16.17% in the first quarter of 2022.

So, let’s explore How to Avoid Paying Interest on Credit Cards.

How to Avoid Paying Interest on Credit Card

The good news is that avoiding credit card interest is possible and easier than you think! Don’t worry this blog post will help you to keep your money in your pocket with the best strategies.

Here are some Powerful Strategies to Save Money by avoiding credit card interest rates:

1. Pay Your Balance in Full each Billing Cycle

For every credit card, it is mandatory to pay around 5% of the credit card outstanding amount. The remaining amount can be rolled over to the next amount. This is such a thing you should completely avoid as this is one of the fastest ways to get into the debt trap.

You should know that credit cards offer an interest-free period between your billing date and payment due date. This interest period is known as the Grace Period. This period usually lasts at least 21 days.

Let’s understand the Grace Period with an example:

Suppose, you get your credit bill on the first day of any month, then you will likely have the 22nd of that month to pay your credit card balance in full without any interest and charges.

In case you have an unpaid credit card balance when the grace period ends, the new purchases will attract an interest rate based on the annual APR. Try to make full payment before the due date so that you do not have to pay interest.

Plus, use credit cards only for planned and regular purchases that you can easily cover with your monthly bills and income.

2. Take Advantage of an 0% Introductory APR Credit Card Purchases

It is always good to apply for a credit card with a 0% introductory APR offer on purchases. These types of credit cards allow you to make purchases without interest from month to month or at a certain time. You can make purchases for a limited time without any extra charges.

While some cards with 0% APR on purchases and balance transfers offer rewards for spending. This feature can reduce your balance if you wish to redeem your points for a statement credit.

Although, a 0% intro APR on credit cards seems very attractive, but make sure you have a proper plan to pay off your credit card balance before the payment due date. However, it seems tempting to make a minimum credit card balance each month, but it’s not the real picture.

» MORE: How to Save Money Fast on a Low Income

3. Consider Debt Consolidation With Balance Transfer Credit Cards

If you are already suffering from credit card debt and want to get rid of credit card interest, one of the best ways to do that is to move to a balance transfer credit card. It will give you a longer period to pay interest rates.

Many credit cards offer 0% intro APR on your balance transfers from other cards up to 21 months. This can save you a lot of money. Not that balance transfer credit cards typically charge 3% to 5% for a balance transfer.

However, there are many other considerations to think about before deciding for a balance transfer. So, here are some considerations to keep in mind before using balance transfer credit cards:

• To get advantage of balance transfer credit cards, you need good or excellent credit to qualify for these cards. Typically the credit ranges from 690 or higher.
• Most credit cards charge a balance transfer fee of 3% to 5% of the transferred amount. It means, there are very limited options available for no-fee balance transfer credit cards.
• The interest on the 0% balance transfer fee increases after the 0% APR period ends. If you can’t pay the full amount, then be ready for the extra interest rate on the remaining amount.

4. Make Strategic Purchases to Avoid Interest

You have to be strategic about big purchases to avoid high interest rates. If you plan to buy an expensive thing in the upcoming times, you’ll need to pay it off for a longer period. Keep your budget in mind before making any large purchases.

In case you missed a payment, you’ll be heavily imposed by extra charges on outstanding debt at the end of the period.

Keep these things in mind before making large purchases:

• Consider a credit card that offers 0% intro APR on new purchases. You will get a longer period to make payments without interest.
• Go for Buy Now and Pay Later Plan: The Buy Now and Pay Later plan allows you to divide big purchases into a series of small payments. However, you may have to pay interest or a fee if you miss a payment.

» MORE: How to Become Financially Independent

5. Avoid Cash Advance Trap

Credit card cash advance is a feature offered by many credit card issuers. Credit card cash advance is a type of short-term loan that a customer can borrow as a cash or cash equivalent. This is usually up to 20% to 30% of your credit card limit.

However, it seems tempting, but the cash advance facility started attracting interest the day they started. Plus, they do not allow a grace period. The bad thing about is that it has higher interest rates than purchases. If you trying to avoid the internet, it’s not a good idea go with a cash advance.

Some examples of cash advances:

• Withdrawing money from a credit card at an ATM.
• Transfer of money from one account to another account.
• Using a credit card for gambling purposes.
• Use your credit card for bill payment or another bank at a post office.

Way To Lower Credit Card Interest

There are many ways to reduce the credit card interest rate. You must consider these ways to lower your credit card interest if you already have debt and don’t want to apply for a balance transfer credit card.

1. Use a Debt Repayment method

If you find yourself in a credit card debt balance, creating a debt repayment strategy is the way to go. You can use debt repayment strategies like snowball or debt avalanche methods to make minimum payments with the highest interest first. Both methods are very helpful in reducing your credit card interest rate.

You can make a list of your debts using debt avalanches in order from highest to lowest interest rate. Try to make the minimum payment for every debt.

Once, you pay off the debt, start paying the debt with the second highest interest rate.

2. Negotiate Interest Rate

If you find you are paying more interest rates than usual, you can ask for a lower interest rate with your credit card issuer. Also, you apply for a credit card with a low interest rate.

According to the report of the Federal Trade Commission (FTC), calling customer care service is the best way to negotiate your credit card interest rate.

3. Consider Debt Payment with a Personal Loan

If you want to pay a credit card balance with low interest rates and find a balance transfer credit card is not the right option for you, consider debt payment with a personal loan. Many best personal loans allow you to pay debts at lower interest rates.

A personal loan will allow you to make equal monthly payments for a fixed period, so it becomes easier to budget and payment for these debt payments.

» MORE: How to Stop Spending Money on Everything

When Are You Charged Interest on Credit Card?

Understanding your grace period is very important because you will no charged by interest during the grace period. After the grace period ends, you will be charged interest on the outstanding amount as well as on the new purchases you make.

In general, you are not charged interest until:

• You will not be charged interest if you pay your credit card balance in full before the due date. Most credit card issuers offer a certain period known as a grace period. This period is typically around 21 days.
• The interest starts accruing after the grace period ends.
• Balance Transfers: Many credit card issuers offer 0% introductory APR offer for a certain time, but the interest starts counting after the period ends.
• Minimum Payments: However, you can do the minimum payment, but it cannot protect you from interest. The remaining amount will be transferred to the next month with the interest rate.

Bottom Line

At the end, the interest you pay for credit card purchases is money on the waster side because the money spent on interest cannot improve your purchase quality. Avoiding interest on your credit card balance can make you fall into a debt trap.

Look for ways How To Avoid Interest On A Credit Card rather than continuously paying it. Paying the full amount each month can benefit you from extra charges. Plus, make full use of the grace period.

Consider, signing up for 0% intro APR credit cards and using credit cards only for purchases that you can afford. If you manage to avoid credit card interest, you’ll able to save money and become financial independent.

How to Avoid Credit Card Interest-Related FAQs