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How to avoid interest on a credit card
Credit cards make it easy to buy that plane ticket or new computer as soon as you want it. But if you don’t pay off your next credit card statement right away, you'll be paying for that purchase for months with interest.
Forty-five percent of credit card accounts carry a balance, according to the U.S. Government Accountability Office, meaning nearly half of card users pay interest on their purchases. Considering that credit card rates have reached an average of 22.75% as of November 2023, carrying a balance can be especially expensive.
However, there are ways to reduce or even eliminate credit card interest. Learn how to avoid interest on a credit card to save money and manage your debt more effectively.
The impact of interest on credit card balances
Credit cards are one of the most expensive forms of debt, but you may not realize just how pricey they can be.
Consider this example: Ken charges $1,000 on a credit card with a 22% APR. His minimum monthly payment is $30 — 3% of his account balance, a common requirement.
If he only paid the minimum every month, it would take him more than four years (52 months) to repay his debt. Worse, he'd repay a total of $1,560 — interest charges added over $550 to his total cost.
Credit card disclosures
When your credit card company sends you your billing statement, it’s required to detail how long you'll be in debt and how much you'll repay in interest with the minimum payment. It will also include how much you'll save if you increase your payments; for example, it may show how long you'd make payments and your total cost if you repaid $100 per month.
Here’s an example of what might be on your statement:
How to avoid interest on a credit card: 3 strategies
If you're researching how to avoid interest on a credit card, there are three main strategies to consider:
1. Pay your statement balance in full
If you can afford it, paying off your statement balance in full by the payment due date is the most effective way to avoid interest charges. With most cards, as long as you pay the statement balance in full, no interest will accrue, and you'll still earn rewards like cash back or airline miles on your purchases.
2. Transfer your balance to a card with 0% APR
If you're carrying a balance, consider applying for a balance transfer card that offers 0% APR for a limited time. With some cards, you could have up to 21 months at 0% APR (though a one-time balance transfer fee often applies). After that, the regular purchase APR applies. You can find competitive offers for balance transfers today with the cards below:
- Annual fee$0
- Introductory Purchases APR0% Intro APR on Purchases for 15 months
- Ongoing Purchases APR19.99% - 28.74% Variable
- Introductory Balance Transfer APR0% Intro APR on Balance Transfers for 15 months
- Ongoing Balance Transfer APR19.99% - 28.74% Variable
- Annual fee$0
- Introductory APR0% intro APR on purchases and balance transfers for the first 21 months, after which the standard APR applies
- Purchase APR18.24% - 29.99% variable
- Annual fee$0
- Introductory Purchases APR0% on purchases for 15 months
- Ongoing Purchases APR18.74%-29.74% Variable
- Introductory Balance Transfer APR0% on balance transfers for 15 months
- Ongoing Balance Transfer APR18.74%-29.74% Variable
The promotional APR on balance transfers gives you several months to pay down the balance without interest, potentially saving you hundreds or thousands of dollars.
Learn more: What is a balance transfer, and how does it work?
3. Apply for a card with a 0% APR promotion on purchases
If you're planning on making a major purchase soon, one strategy is to apply for a new credit card with a 0% APR promotional offer on new purchases. Some cards will give you 0% APR on new purchases, and it’s common to have at least 15 months to repay the purchase amount without interest. Here are a few options available today:
- Annual fee$0
- Introductory APR0% intro APR on purchases and balance transfers for 15 months, then variable 19.74% - 29.74% APR
- Purchase APR19.74% - 29.74% variable
- Annual fee$0
- Introductory APR0% intro APR on purchases and balance transfers for 15 months, then variable 19.74% - 29.74% APR
- Purchase APR19.74% - 29.74% variable
- Annual fee$0
- Introductory Purchases APR0% Intro APR on Purchases for 12 months
- Ongoing Purchases APR17.99% - 23.99% Variable
This approach can be especially helpful for large purchases such as new appliances or a computer since it allows you to spread out the cost over several months without interest accruing.
Read more: See our picks for the best American Express credit cards
7 ways to reduce credit card interest
You can't always avoid credit card interest, but there are several ways to reduce how much accrues:
1. Pay more than the minimum
Your credit card’s minimum payment is typically 1% to 3% of your balance. Increasing your payment by even a small amount, such as $10 or $20 per month, can make a big difference.
For example, let's say you had $1,000 in credit card debt at 22% APR and a minimum payment of $30 per month. If you increase your payment to $50 per month, you'd pay a total of $1,257 and cut your repayment timeline in half.
2. Sign up for automatic payments
Missing a single payment can be a costly mistake; not only will you pay a late fee, but credit card companies can hike your rates when you're late, and penalty APRs can be sky-high. To prevent that from happening, sign up for automatic payments to at least cover the minimum required; it will ensure all of your payments are made on time.
3. Avoid cash advances
When you take out a cash advance, you’ll typically face added fees and a higher cash advance APR. Interest accrues on the entire cash advance amount immediately, starting on the day you borrow the money — so even if you pay off the balance by the statement due date, they can be an expensive form of credit.
4. Request a rate decrease
Research other card options and contact your card issuer to request a rate decrease. Some issuers will lower your APR to keep you as a customer, particularly if you've used your card wisely and made your payments on time in the past.
5. Use a debt consolidation loan
A debt consolidation loan — where you take out a personal loan and use it to pay off your existing credit card debt — can be a smart way to save money. Debt consolidation loans tend to have lower rates than credit cards, so the savings can be substantial.
6. Create a debt repayment plan with a credit counselor
If you're overwhelmed by your debt and aren't sure where to start, set up a meeting with a nonprofit credit counseling agency. A counselor will review your debt and monthly budget with you and work with you to design a debt repayment plan. In some cases, the counselor may be able to negotiate with the credit card company to lower your APR or waive fees, helping you get out of debt faster.
The Consumer Financial Protection Bureau (CFPB) offers advice on how to find a reputable counseling company and what questions to ask before you decide to work with one.
7. Follow the debt avalanche method
If you carry a balance on multiple cards, one of the most cost-effective ways to pay off your debt is to follow the debt avalanche method. Here’s how it works:
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Make a list of all of your credit card accounts, ranking them from the highest APR to the lowest.
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Make the minimum payments on all of your cards each month.
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Apply extra payments toward the card with the highest APR. Once that card is paid off, roll your extra payment amount toward the card with the next-highest APR.
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Repeat these steps until all of your accounts are paid in full.
For example, let's say you had the following cards with balances:
Your combined minimum payments total $126. If you had $150 per month to dedicate toward your debt, you could pay an extra $24 per month. With the debt avalanche method, that additional amount is applied to the American Express card since it has the highest APR.
Once the card is paid off, you apply the Amex's payment amount — the minimum of $15 plus the additional $24 you were paying — to the Visa card. After the Discover card is paid off, you roll those payments toward the Visa card, the one with the lowest rate.
Learn more: The best ways to pay off credit card debt
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