Since a credit card is an enticing and convenient way to pay for products or services, its irresponsive use can build a huge wall of debt. And credit card debt is expensive. As you can keep using your card even previous month’s balance is due, it can grow faster. One effective way to avoid building credit card debt is to lower or eliminate interest on your credit card.
When you pay your balance in full before the due date, there is no need to worry about interest. Whether you have a credit card with a higher interest rate or the best lowest available, there will be no interest added to your balance. But when you carry the balance month to month, it can add up quickly to build more debt faster.
Why Avoid Credit Card Interest?
Credit card interest is basically a fee you pay to the credit card company for borrowing money. Compounding is the only thing that makes interest troublesome for credit card users. When you don’t pay your balance in full, the agreed interest rate is added to your total balance. And when you carry a balance month to month, you will also pay interest on interest including the outstanding balance. This makes it difficult for users to get out of credit card debt.
This is the reason, you should try your best to avoid interest whenever possible. Paying your balance in full, and reaping the benefits of 0% APR, grace period and no-interest benefits are some of the best ways to avoid or lower interest on your credit card.
4 Proven Ways to Avoid Credit Card Interest
Credit cards usually have a higher interest rate than other methods of borrowing money. For your convenience, we have listed some ways you can avoid paying interest on your balance to save lots of bucks every month.
Pay Your Full Balance Every Month
Paying your credit card balance in full every month is one of the best ways to avoid interest on your monthly balance. In this way, you just pay the money you owe. But when you carry a balance from one month to another, you are obliged to pay the agreed percentage of interest on the balance you carry, until you pay off the whole balance. Some credit cards also come with a grace period during which users don’t need to pay interest on purchases. But carrying a balance, the grace period is terminated by the card provider.
Avoid Cash Advances
Some people use their credit cards for cash advances. And annual percentage rate on cash advances is higher than the base interest rate. When a user is required to pay back the cash advance, a huge amount is added to the total as interest on the cash advance. Which is one of the common ways of building credit card interest. That’s why it is always recommended to avoid cash advances if you want to avoid interest on your credit card.
Use 0% Intro APR Periods Wisely
Some credit cards offer 0% introductory APR to consumers so they can reap the advantages of a card without paying a single penny towards interest. 0% APR period helps users finance large purchases that they can pay off over a particular period of time without any interest. People also use 0% introductory APR period to consolidate credit card debt by transferring the debt of a credit card to another card that offers a 0% interest for a given period of time (usually 6 to 21 months). During this time, users are not responsible to pay interest even if they carry a balance. Once the 0% APR period expires; the company will charge the base interest rate on outstanding balances.
Wise use of a 0% APR period helps you save a lot of bucks in terms of paying no interest. So, make sure to get the best credit card with a long 0% APR period and understand the basic terms and conditions to take advantage of it. Avoid carrying a balance after the expiry of the 0% APR promotion to avoid interest on your card.
Utilize Balance Transfers
Balance transfer credit cards are the cards that offer no-interest introductory offers or 0% APR periods. These cards come in handy when you carry a huge balance on your existing card and transfer that balance to a new card with no-interest promotion. After moving your balance to a new card, you have up to 21 months for paying off that balance without incurring a single cent as interest. This is a common and effective way of consolidating credit card debt. However, such cards may charge a particular fee as a balance transfer fee between 3% to 5% of the amount transferred to a new card. This helps you pay off your large balance without incurring interest on it.