Credit cards may be useful financial tools, but they also have a dark side: If you are not careful, you can quietly drain the high interest rates of your bank account. Once you start carrying balance, even a small one, the amount you owe will be faster than you realize. The average credit card APR in the U.S. hovers over 20%, and that number may be higher, depending on your credit score and card type.
If you want to keep more money in your pocket and less in the hands of a credit card company, it is crucial to know how to avoid paying those painful interest fees. Fortunately, with some plans and some smart habits, you can avoid high rates and take advantage of your credit card.
Here are seven effective strategies to avoid paying high interest rates on your credit card and keep your financial life stable.
1. Always pay the balance in full
The easiest and most powerful way to avoid interest altogether is to pay your full balance every month. When you pay the entire stated balance before the expiration date, most credit cards offer grace periods, meaning you won’t charge any interest at all. If you pay only the minimum or part of the amount, you will lose that grace period and start rising interest immediately. Setting up automatic payments for full payments can help you stay consistent and avoid accidental slips.
2. Negotiate lower interest rates
This can feel intimidating, but calling your credit card issuer and asking for a lower interest rate can actually work. Especially if you have a good payment history, reliable credit scores, or competitive offers on other cards, the issuer may be willing to offer you a better deal to keep your business. There is no harm in asking. Even if your interest rate drops slightly, you can save hundreds of time.
3. Transfer your balance to 0% APR card
The balance transfer offer may be a lifeguard if you currently hold the balance on a high interest card. Many credit cards offer balance transfers of 12 to 18 months of promotional periods of 0% interest. This gives you breathing room to pay off your debt without adding extra interest. Just make sure to read beautifully printed items. There may be a balance transfer fee and you will want a plan to pay off the balance before the end of the promotion period.
4. Improve credit score
Your credit score plays a huge role in the interest rates you provide. A higher score usually means a lower interest rate. Work hard to improve your credit by paying your bills on time, reducing debt and limiting new credit queries, which can reward a lot of time when negotiating better terms or eligible for a low-priced card. Even smaller improvements to your score can unlock better financial opportunities.
5. Use personal loans strategically
If you are struggling to address high-interest credit card debt, personal loans may offer lower fixed interest rates and clear earnings plans. Consolidating your credit card balance into a personal loan can make payments easier to manage and save you a lot of interest expenses. However, it is important to surf the best loan terms and avoid creating new credit card balances after the merger.
6. Payment above monthly payment
Interest is usually calculated based on your average daily balance. If you make more than once a month, you can lower the average balance and reduce the interest incurred. This approach is sometimes called “micro payments” and can also make it easier for you to stay above your spending and avoid falling into the minimum payment trap. Even a small amount of extra payment can increase savings over time.
7. Choose a low interest card from the beginning
If you know you’re constantly balancing occasionally, it makes sense to prioritize low interest cards over gorgeous reward cards. Many reward cards charge higher APR to make up for the allowances they offer. When purchasing a new card, go beyond the registration bonus and focus on regular APR, and you will be trapped if you can’t pay the full balance. A low-interest card without grey may not sound exciting, but it protects you from expensive mistakes.
It’s overwhelming but feasible
High interest credit card debt can be a serious financial loss, but it is not inevitable. By keeping your payment organization and actively managing your account strategically, you can avoid falling into the high interest trap by using credit. Whether it’s negotiating with the issuer, transferring balances wisely or increasing credit scores, today’s small steps can have a significant impact on your future finances.
Credit cards should be the tool for you. Not the other way around. With a little planning and discipline, you can keep interest payments to a minimum and financial goal.
The smartest move you’ll take is to avoid paying high interest on your credit card?
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Riley is an Arizona native with over nine years of writing experience. From personal finance to travel to digital marketing to pop culture, she wrote everything in the sun. When she is not writing, she will spend time outside, reading or embracing two corgis.
