Credit cards offer convenience when making purchases. You can buy things online and don’t need to worry about walking around with cash. However, carrying a balance on your credit card can become costly as interest rates remain high. As you try to hold onto more of your money, you may wonder what is the best strategy to avoid paying interest on your credit cards.
Here are a few credit cards you may find useful.
MoneyLion can help you explore a wide variety of credit card options tailored to different needs and preferences.
Strategies to avoid paying interest on credit cards
You can use credit cards without having to pay interest – here’s how.
1. Pay off the full balance each month on time
Credit card companies only charge interest on your unpaid balance. A good strategy to avoid credit card interest is to pay your statement balance in full every month by the due date.
2. Set up automatic payments
You can set up your account to automatically deduct your monthly statement balance from your bank account. This way, you don’t get hit with interest or late fees if you forget to send in your payment.
When you mail your credit card payment, you could be charged interest and fees on your statement balance if it arrives late. Instead, make your payment online so that your account can be credited in a timely manner.
3. Avoid credit card cash advances
Most credit card cash advances don’t come with a grace period. Instead, you owe interest the day you take out the advance. Plus, you typically pay higher interest rates with a cash advance than a regular credit card purchase.
4. Keep track of your spending
Many credit cards have reporting tools that allow you to see how and where you spend your money. By keeping a close eye on where your money goes, you can better control your spending and lower your credit card usage.
5. Use a balance transfer card
Some credit cards let you transfer a balance from another for little to no fee. So, if you have a credit card with a lower rate, you can pay off what you owe faster when you transfer your balance. If your interest rates are too high or you don’t have a card that allows you to transfer a balance, consider opening a new balance transfer card account.
6. Avoid using the card for unnecessary purchases
Using credit cards wisely can help avoid interest. Your balance can quickly rise if you make unplanned charges on your card. Instead, stick to using your card for necessary purchases.
If you need to buy something that falls outside your budget, look to a payment app offering a buy now, pay later feature. You could land a 0% interest rate when you pay back what you owe by the agreed-upon date.
7. Take advantage of introductory 0% APR offers
You may land a 0% introductory interest rate when you open a new credit card account. If you transfer your credit card balance, you can pay off what you owe over time without incurring any interest. Just be sure to fully pay the balance due before the introductory rate expires to avoid paying interest.
8. Negotiate for a lower interest rate
You may be able to negotiate a lower interest rate with your credit card issuer. If you have a good history of making payments on time or suffer a temporary financial setback, the credit card company may be willing to give you a break on your interest rate. Even if it is just a slight rate reduction, every little bit helps.
What should you do if you carry a credit card balance?
Even if you carry a balance on your credit cards, there are strategies you can follow to cut down on what you owe in interest.
- Use your savings: While it may be tough to part ways with your savings, you’ll save money by paying off what you owe. Credit cards charge higher rates than what you earn in your savings account. While your savings may dip, you end up holding onto more of your money by lowering your credit card balance. Just try to keep some money stashed away in your savings account for emergencies.
- Make multiple payments: Credit card interest is calculated based on your average daily balance. Consider making smaller payments throughout the month rather than making one lump payment on the due date. You can save yourself some interest by lowering your average daily balance.
- Have a plan: Come up with a strategic plan to pay back what you owe. If you have multiple credit cards or debt, focus on paying off one debt at a time while making minimal payments to the other. Once you have paid this card balance in full, move on to the next credit card.
- Take out a personal loan: Consolidate your credit card debt by taking out a personal loan. Your debt may become more manageable since you make only one payment. Plus, you could save money with a lower interest rate.
MoneyLion helps you find personal loan offers based on your background and info you provide. You can get matched with offers for up to $100,000 from top providers. You can compare rates, terms, and fees from different lenders and choose the best offer for you.
”Take Steps to Avoid Credit Card Interest
You can try many strategies to lessen the bite of credit card interest. Whether you strive to fully pay your balance each month or consolidate your credit card debt with a personal loan, you can take steps to hold onto more of your money.
FAQ
Can I avoid paying interest on cash advances?
Cash advances accrue interest the day you take them out. The best way to avoid paying interest is to skip taking out a cash advance.
Does closing unused credit cards help avoid paying interest?
You only pay interest on the credit card balance you carry over each month. Closing an unused credit card with no balance does not help avoid paying interest.
Are credit card rewards worth it if I have to pay interest?
Credit cards that offer rewards may come with higher interest rates. Unless you pay your balance in full each month, the interest you pay could easily dwarf the rewards you earn.
