Credit card interest is some of the worst interest you can get and will cause an increase in your credit balance. That is the main reason you should find a way to avoid paying any interest on your credit card to begin with.
Credit cards are a financial service that is provided by the financial companies who issue them, so you are going to pay for them. The best way to not pay interest on your monthly expenses is to not have a credit card and live a cash-only life.
But that is unfortunately not meant for all, so we found some ways to help you on how to avoid credit card interest.
Pay the Full Balance
This method is the best way to avoid paying interest on your credit card balance for the next month and beyond. If you use your credit card for normal monthly expenses like groceries and gas, you will be able to cover that every month.
This is just a way to have all your expenditure records all in one place for better management of your cash flow. Paying the full balance every month will also help lower your credit utilization rate and, in the process, improve your credit score.
You should avoid making purchases with your credit card that you will not be able to fully pay by the end of the month. For this, you need to discipline yourself and avoid any spending that will be more than you can afford to pay off with just one month’s income.
Use a Balance Transfer Card
This should be just a one-of method where you can transfer the balance of one card to another one where you have no interest. Many credit cards come with an introductory offer where you will pay no interest for up to 18 months.
So by using this type of balance transfer card, you can easily pay down the balance of a card with a high APR. Then you simply pay that new card balance off in the 18 months, and you pay no interest on the transferred amount.
This is quite a handy way to skip that interest and save yourself some money in the long run. By using this method, you also let the credit card work for you instead of against you, but you must be sure about it.
If you will not be able to cover the balance in those 18 months, you will be paying a lot of interest.
Pay As You Spend
If you want to keep the balance on your credit cards low, you can pay as soon as you have the money available. If you can pay more times a month, it will be better; this will help to avoid paying everything at month-end.
So, the motto here is to purchase with a credit card and then pay the balance you spent on it as soon as possible. This will help you never to make a late payment, and your statements will show a zero balance every month.
This is also a very safe way if you have a credit card with cashback rewards linked to it while you build your credit score. With new apps available for your mobile devices, it will show your purchases, and you can make immediate payments from a connected bank account.
The overall benefit of this method is that you can have the cashback rewards and better management of your purchases. This is especially great for people who want to have a record of all their purchases, like small businesses and freelancers.
Take Advantage of Grace Periods
This is something not many credit cardholders know, and that is every credit card comes with a grace period attached to it. This is the number of days you have to pay the bill after the monthly billing period ends.
For you to benefit from this method is to know your billing date as well as the grace period of your credit card. With the newest apps from your credit company, they usually give you the due date as well as the minimum payment.
This is normally about 3 weeks after the billing date on your credit card ends, so you have about 21 extra days. If you pay the full balance within the grace period of your credit card, you will not be charged interest on the balance.
If, for instance, the billing date runs from the 23rd of a month, it ends typically on the same date the next month. So, add another 3 weeks to that date, and you have enough time to pay the full balance without interest.
To benefit from this, you can make large purchases at the beginning of the billing cycle to give you 7 weeks to pay. The great thing is that you will not incur interest charges for those purchases while it gives you time to pay them off.
Things To Keep In Mind
- If you get a new card with zero interest and zero transfer fees and you pay late, you will lose those benefits.
- You should have complete control of your spending to be able to make on-time payments.
- Stay well below the maximum credit you are allowed on credit cards.
- Spend only what you can afford to pay in one month so you will be able to cover the balance.
- Make use of the handy apps provided by creditors for instant updates of your purchases.
- Credit card interest is not just a once-off thing; every month you have a balance, you will pay interest.
- High credit scores will give you access to lower APR on other credit products such as personal loans and home loans.
Summary
You need to be in total control of your spending if you want your interest rate to be zero all the time. You can better manage your finances if you are in control of your credit card purchases, and that will take some measure of self-control.
Hopefully, these tips will help improve your life with much less stress and better control over your finances.