How to avoid credit card interest (2024)

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Credit cards come with perks like rewards, purchase protections, and travel benefits. But they also come with high interest rates that can quickly add up.

The good news is there are ways to avoid or minimize paying interest on your credit card purchases. Learning how to manage your cards is an important skill that can save you hundreds (or thousands) of dollars over time.

Here are eight key strategies to help reduce or eliminate interest charges.

1. Pay your balance in full each month

The number one way to avoid credit card interest is to pay your entire bill on time and in full each month. This is often referred to as paying the statement balance.

As long as you pay the full amount due by the payment due date, you won't pay a penny of interest on your purchases.

The average credit card interest rate is 20.75% (as of March 2024). That rate will vary depending on the card and your credit score.

Credit card interest accrues daily, so it can quickly snowball over time. For example, if you have a balance of $5,000 over the course of the year, you’d rack up over $1,000 in interest charges alone.

Set up autopay or payment reminders to help make sure you never miss a payment deadline. If you occasionally carry a balance, prioritize paying off the current balance in full as soon as possible. The longer you carry debt, the more interest gets charged each month.

2. Pay more than the minimum payment

If you can’t pay the full amount, try to make a payment beyond the minimum amount due.

Your card issuer determines your minimum payment, which typically includes interest charges and a small percentage of your balance, between 1-3%.

If you pay just the minimum, interest will continue to accrue on the unpaid balance, making it harder to pay off your total. Paying extra lowers the principal balance that gets charged interest each billing cycle.

Let’s return to that $5,000 balance with a 20.75% APR. In this example, your initial minimum payment is the interest you owe plus 1% of your balance, or $137.50.

• If you only made the minimum payment on your card, it would take you over 23 years to pay off your balance, and you will have paid $8,124.62 in interest alone.
• If you increase your monthly payments to $200, it would take you under three years to pay down your debt, and you’d only pay $1,633.23 in interest.

Paying more than the minimum can also help lower your credit utilization and boost your credit score. The longer you carry a balance, the more money you lose to interest. Paying more upfront — and on time — reduces the overall interest paid, saving you money in the long run.

Check your statement to understand exactly what your minimum payment covers each month. You can use a minimum payment calculator to see how incremental increases can accelerate your debt repayment.

3. Take advantage of 0% intro APR offers

One way to make large purchases interest-free is to open a credit card with an introductory 0% APR period. These offers allow you to avoid paying interest for a period between 12 and 21 months, depending on the card.

Some cards offer 0% interest on both new purchases and balance transfers during the promotional period.

If you carry debt, you can focus on paying down the principal, saving you significant money compared to cards with high variable APRs.

Make sure you pay off the full purchase before the 0% APR period expires. Otherwise, any remaining balance will start accruing interest at the regular rate.

4. Request a lower rate from your issuer

If you do carry an ongoing balance and get charged interest, consider calling your credit card company to request a lower rate.

If it’s one of your first times missing a payment, your card issuer may offer a one-time grace period. Customers in good standing who have made timely payments in the past may qualify for reduced APRs.

Success with this varies, depending on the card company's policies — and your credit score. The worst they can say is no. But in some cases, a quick phone call can slash interest rates and save you money.

5. Use a budgeting app to track your spending

Budgeting apps like YNAB and GoodBudget can help you track monthly cash flow across spending categories over time. You can connect your credit card accounts to the app and get real-time spending alerts.

Some apps will look at your spending patterns and can help you identify areas to cut back — potentially helping you avoid interest charges.

Many budgeting apps also let you set reminders to stay within your financial boundaries and avoid taking on debt. The best budgeting app for you is the one you can stick to, helping you reach your financial goals.

6. Consider a personal loan

A personal loan can help you avoid credit card interest by providing a lump sum of money at a potentially lower interest rate than most credit cards.

Using a personal loan to pay off high-interest credit card balances, you can consolidate your debt into a single, fixed-rate payment. Personal loan terms range between 2-7 years, and loan amounts vary depending on the lender.

The fixed nature of personal loans makes it harder to fall into a cycle of debt and helps you set a clear timeline for paying off your balance.

7. Use credit card rewards

One often overlooked perk of credit cards is the ability to use cash back or points to lower your balance, helping you avoid interest.

You can offset your expenses and potentially reduce your reliance on carrying a balance on your credit card. This could include using cash back to lower your statement balance or putting points towards free travel or discounted products.

This can be a smart strategy as long as you pay your monthly balance on time.

8. Stick to debit cards or cash

The most straightforward way to avoid credit card interest is to simply cut back on using your credit card.

When you use a debit card or cash for your day-to-day expenses, you use funds you already have in your bank account. This removes the need to borrow money and incur interest charges.

It also may be easier for some to stay within their budget and avoid overspending when using a debit card or cash. The downside is that most debit cards don’t earn rewards or have the same fraud protections as credit cards.

The bottom line

It may take some discipline and smart financial habits to avoid paying credit card interest. But putting these methods into practice makes it possible to avoid interest, even if your current balances require some time to pay down.

Editorial disclaimer: Opinions expressed are author's alone, not those of any bank, credit card issuer, or other entity. This content has not been reviewed, approved, or otherwise endorsed by any of the entities included in the post.