Credit card interest can quickly add up and make your purchases more expensive in the long run. With rising credit card interest rates in 2023, it’s crucial to find strategies to avoid or reduce this financial burden. In this article, we will share some effective strategies to help you save money and eliminate credit card interest.
4 Ways to Avoid Credit Card Interest
With the average credit card interest rates currently exceeding 20%, it’s essential to try your best to avoid paying this additional charge. Not only will avoiding credit card interest save you money, but it will also help you steer clear of falling into a cycle of debt. Here are four strategies to help you eliminate credit card interest from your life.
1. Pay your credit card bill in full each billing cycle
Credit cards usually offer an interest-free period between your billing date and the required payment date. This period, known as the grace period, typically lasts at least 21 days according to the Consumer Financial Protection Bureau (CFPB). By paying your credit card statement in full before the grace period ends, you can avoid any interest charges. To achieve this, it’s crucial to track your spending and ensure you have enough cash to cover all your charges. Creating a monthly budget or spending plan can help you stay on track and use credit cards wisely for planned, regular purchases that you can easily afford.
2. Use budgeting apps to track spending
Utilizing budgeting apps can be a great way to earn rewards with credit cards while avoiding debt. These apps make it easy to track your purchases throughout the month and allocate your income in a way that helps you stay ahead of your bills. Popular budgeting apps like Mint, Goodbudget, EveryDollar, and You Need a Budget can assist you in managing your finances effectively.
3. Consolidate debt with a balance transfer credit card
If you already have credit card debt, one effective way to eliminate credit card interest is by consolidating your debt with a balance transfer credit card. These cards offer a 0% APR on balances transferred from other cards for a specific duration, usually up to 21 months. Although they might charge an upfront balance transfer fee, the savings on interest can outweigh this cost. The Citi Simplicity® Card is an excellent example of a balance transfer credit card that offers 0% APR on balance transfers for 21 months and on purchases for 12 months, with no annual fee, late fees, or penalty interest rate.
4. Consider a 0% APR credit card for purchases
Some credit cards not only offer 0% APR on balance transfers but also extend the same zero-interest offer to purchases. These cards allow you to make purchases without accruing any interest for a limited time. This feature can be especially helpful for making significant purchases. Some cards also provide rewards for spending, which can further reduce your balance if you redeem points for a statement credit. For example, the popular Chase Freedom Unlimited® card offers a 0% introductory APR and cashback rewards on travel, dining, drugstore purchases, and more.
4 Ways to Reduce Credit Card Interest
If you already have credit card debt or prefer not to apply for a balance transfer credit card, there are still ways to reduce the amount of credit card interest you’re paying. Consider these options:
1. Tap into savings to pay down credit card debt
Although it may seem counterintuitive, using your savings to pay off credit card debt can make financial sense. The high interest rates on credit card debt far exceed the rates earned from savings accounts. By paying off your debt with savings, you can save significantly on interest over time.
2. Consolidate debt with a personal loan
Consolidating your debt with a personal loan can be an excellent option if you want to pay lower interest rates without the temptation of spending more with credit cards. Personal loans often offer lower fixed interest rates compared to credit cards, along with fixed monthly payments and a set repayment schedule. Look for personal loans with low rates and no hidden fees.
3. Look into credit card payment plans
Some credit cards offer payment plans as an alternative to paying interest. Programs like the Amex Pay It Plan It help you create a payment schedule for your purchases. By using this program, you can make multiple payments on eligible purchases throughout the month or set up a payment plan for larger purchases. While these plans may have fees, they can be an effective way to avoid credit card interest.
4. Negotiate a lower credit card interest rate
Another option to reduce credit card interest is by negotiating a lower interest rate with your card issuer. You can explore low-interest credit cards or contact your current card issuer to inquire about lowering your rate. It’s recommended to call the customer service number on the back of your card and ask if a lower rate is possible. Even if they decline, it’s worth trying to save on interest charges.
Why You Want to Avoid Paying Credit Card Interest
The main reason to avoid or reduce credit card interest is simple: it makes your purchases significantly more expensive. Credit card interest can pile up, costing you a considerable amount over time. For instance, a $6,000 furniture purchase with a 21% APR could end up costing over $8,500 in total, including interest. Making only the minimum payment on a balance could inflate the total cost even further. By avoiding credit card interest whenever possible, you can save money and alleviate financial stress.
TIME Stamp: Credit Card Interest is a Waste of Money
Credit card interest is essentially money down the drain. Paying interest on your credit card doesn’t improve the quality of your purchases or your life. It drains your bank account and hinders your ability to get ahead financially. Our advice is to explore various strategies to avoid or reduce credit card interest. Consider signing up for a 0% APR credit card and using credit cards only for purchases you can afford to cover in cash. By eliminating credit card interest whenever possible, you’ll save money and free yourself from financial burdens.
Frequently Asked Questions (FAQ)
When should I pay my credit card?
You can pay your credit card bill any time of the month that suits your budget, as long as it’s before the payment due date. Some people even prefer to pay their credit card multiple times throughout the month to stay on top of their spending and prevent credit card interest from accruing.
What are the best 0% APR balance transfer cards?
Some of the best 0% APR balance transfer credit cards include the Citi Simplicity® Card, the Citi® Diamond Preferred® Card, and the Citi® Double Cash Card.
Why did I get charged interest on my credit card after I paid it off?
If you see an interest charge on your monthly statement, even after paying off your credit card bill, it may be due to residual interest. This occurs when your card issuer charges interest from the time your bill was sent until they received your payment. Contact your card issuer to inquire about the details of the interest charge.