If you don’t count what they owe on their mortgage, the average American has $38,000 in debt. For comparison’s sake, that’s the price of a private college education.
And that may be where some of that debt comes from – student loans. Luckily, student loans don’t have high interest rates – but credit cards do.
That’s what we’re talking about today: how to avoid credit card interest. Are you looking into a credit card or trying to reduce your current rates?
Get started with our tips below.
What is Interest?
Interest is a fee that credit cards charge based on what you purchase. It’s a pre-set amount of each purchase and it’s the main way credit cards make money.
The sooner you pay off your credit cards, the less interest you incur. Sometimes you can avoid it altogether, sometimes you can’t. We can help you spend less with the tips below.
How to Avoid Credit Card Interest
Whether your card’s interest rate is 12% or 36%, you can take steps to avoid paying more.
The Gold Standard
The best way to avoid interest is to never occur any. To do that, you have to pay off your credit card balance in full every month. Or pay it off before the end of the grace period.
Grace periods vary between providers and can be anywhere from 30 days to six months. If you pay off your balance before the end of the statement cycle or the grace period, the card has nothing to charge you interest on.
But not all of us can pay our whole balance in full every month. You probably got a credit card because you needed more access to cash, not to just spend it in a different way.
That’s where you have to get creative with how to avoid credit card interest.
Transfer Your Balance
Let’s say you already have a credit card and you’re paying interest fees. You may want to look into a balance transfer. That’s when you find a card with better terms and literally move your debt from one account to the other.
What’s great about balance transfers is that there’s usually no interest for an introductory period. If you can pay off your balance before the no-fee term runs out, then you’re avoiding interest altogether.
Why doesn’t everyone do this all the time? Well, there are balance transfer fees when it comes to moving money – usually, they have a set amount or percentage of the amount you’re transferring.
Plus, it’s bad for your credit score if you apply for new credit cards all the time. Balance transfer fees are to help you get out of a bad card – not to jump from card to card forever.
Some people use transfer cards for debt consolidation.
A Lack of Interest
If you can’t pay off your entire balance right away, think about using a balance transfer card. It’s not a fool-proof way how to avoid credit card interest, but it can help you lower your monthly payments.
Want more credit-card advice? Click here.