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While using credit cards for short-term borrowing can have lots of perks — from earning valuable rewards to temporarily covering the gaps in your budget — the interest charges can rack up quickly on this type of spending. If you aren’t careful, that interest can cause your balance to snowball from a manageable amount into a significant financial burden, especially now that the average credit card APR is sitting at over 23%. A $3,000 balance at 23% APR, for example, would accrue over $680 in interest in just one year if left unpaid, and the average cardholder owes a lot more than that currently.
That’s why it’s important to try and avoid interest charges when you can, and understanding how credit card interest works is the first step in doing so. When you make purchases with your credit card, the interest is calculated using your average daily balance, and the interest will typically compound daily. That said, interest charges typically don’t accrue immediately. Most cards offer a grace period of at least 21 days between your statement date and payment due date, and if you pay your balance in full during this period, you can avoid interest charges entirely.
With proper planning and the right strategies, it’s possible to eliminate or significantly reduce those credit card interest charges — and that’s true whether you’re currently carrying a balance or simply want to prevent future interest charges. Below, we’ll detail how to do just that.
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How can I avoid paying interest on my credit card?
The following strategies can help you keep more money in your pocket rather than paying it to credit card companies:
Pay your full statement balance each month
It may seem simple, but the most effective way to avoid credit card interest charges is to pay your full statement balance each month. You can do this by setting up automatic payments to ensure you never miss a due date, keeping interest out of the equation — and you can also consider making multiple payments throughout the month to keep your balance low. If you’re going to take this route, though, tracking your spending is crucial to avoid overextending yourself. Otherwise, you may find that you’re unable to pay off what you owe in full because of overspending.
Learn more about the debt relief options available to you here.
Leverage 0% APR balance transfer offers
If you’re currently carrying a balance, a balance transfer to a card offering a 0% APR promotional period can temporarily remove interest from the equation, making it easier and more affordable to pay off what you owe. These offers typically last from 12 to 21 months, during which no interest accrues on the transferred amount. This strategy gives you time to pay off the balance without additional financial pressure. However, there are a few things to keep in mind, including:
- Balance transfer fees: Many cards charge a fee (usually 3% to 5%) on the amount transferred. Compare this cost to your current interest expenses to determine if it’s worth it.
- The regular APR: If you take this route, try to pay off what you owe before the balance transfer period ends. Otherwise, the standard APR tied to the credit card will apply to any remaining balance.
Take advantage of 0% APR introductory rates
If you’re making a large purchase or want to spread payments over time without interest, consider opening a new credit card with a 0% APR introductory offer on purchases. These offers usually last up to 18 months and allow you to pay off your spending interest-free during the promotional period. To make the most of this strategy:
- Plan for repayment: Divide your total spending by the number of months in the promotional period to create a repayment schedule.
- Avoid exceeding your budget: Having an interest-free period doesn’t mean you should overspend. After all, if you exceed your budget, you’ll likely end up paying interest charges on your remaining balance when the intro period ends.
- Read the fine print: Ensure you understand the full terms, including what happens after the promotional period ends.
Research your debt relief options
For those struggling with high interest on existing credit card debt, several debt relief options are worth considering. These options can help you reduce the financial burden of interest while paying down debt in a manageable way:
- Debt consolidation: When you consolidate your debt, you combine multiple credit card balances into one loan with a lower interest rate, making repayment simpler and more affordable.
- Debt management plans: With a debt management plan, you work with a credit counseling agency to negotiate lower interest rates and a structured repayment plan with your creditors.
- Credit counseling: While credit counseling may not directly cut down on interest charges, the professionals you work with during this process can provide budgeting advice and strategies tailored to your financial situation — and in some cases, it could result in paying less in interest over time.
The bottom line
Avoiding credit card interest can save you a significant amount of money on your credit card debt, but doing so requires commitment and discipline. Balance transfers and introductory rates can provide temporary relief, but ultimately, developing good financial habits is also essential for long-term success. By implementing these strategies and staying focused on your financial goals, you can break free from the cycle of credit card interest and put that money toward building wealth instead.