There is no doubt that credit cards can prove to be a convenient financial tool. In addition to making purchases you want to, you can also gain reward points, cashback, and improved credit scores – but only when used responsibly. The convenience of credit cards comes with a catch: there are interest charges included that can slowly eat away at your wealth. If you carry a balance from month to month, you could end up paying heavy interest charges that can push you into debt!
Credit card debt is expensive – and if you continue spending on your card even when you owe a balance, the debt can accumulate to unimaginable heights. What may have started as a manageable amount would steadily snowball into a huge financial burden you can’t escape.
For these reasons, you must try to avoid interest charges altogether. Doing so starts with understanding how credit card interest works. When you buy something using your credit card, the interest is calculated using your average daily balance, and it will usually compound daily. Interest charges do not accrue immediately; many cards offer a grace period of at least 21 days between the statement date and the payment due date. So, if you settle your balance in full during this period, you can avoid incurring any interest charges.
Eliminating credit card interest charges is possible by implementing the right strategies and planning efficiently. Let’s see how to do just that below.
Settle Off Your Balance In Full Every Month
Paying off your balance in full is the easiest and most effective way to avoid paying any interest on your credit card. When you pay your balance in full each month, you ensure you don’t carry any debt into the next billing cycle. This helps avoid any interest charges on your credit card. Subsequently, it also allows you to maintain a good credit score and keep your finances in order.
Take Advantage Of The Grace Period
Typically, most credit card companies offer a grace period between the end of the billing cycle and the due date for the payment. Within this period, no interest is charged on new purchases. To make the most of this grace period, you must settle your balance before the due date. Doing so helps you keep your credit card bills interest-free!
Consolidate Debt With A Transfer Credit Card
If you have credit card debt, consider moving it to a balance transfer credit card, which gives you a longer time to pay down your debt at 0% interest, helping you to save a substantial sum of money. Typically, the borrower is required to have good or excellent credit to qualify for these cards, meaning a FICO score of 690 or more. You should also remember that most of these cards charge a balance transfer fee of about 3% to 5% of the transferred balance. The interest rate will increase after the 0% APR promotion ends, and if you haven’t settled the due in full by then, you will owe interest on the remaining amount.
Understand The Billing Cycle
Knowing your billing cycle and how it works allows you to plan your payments more efficiently. Most credit card companies have a 30-day billing cycle, which is followed by a due date. Make sure you mark these dates on your calendar to remind you to settle the balance before the interest charges come into play. It is helpful to set up reminders a few days before your due date so you don’t miss it.
If you think waiting until the due date is risky, consider making the payment before the due date. In fact, this would be the ideal course of action because it gives you a buffer period and ensures that your payment is credited on time, eliminating interest charges.
You can take it a step further by setting up automatic payments on your bank account to take any forgetfulness entirely out of the equation. These give you peace of mind, knowing that you won’t miss your payments, thereby allowing you to avoid interest charges.
Keep Track Of Your Expenditures
A lot of people tend to make the mistake of considering a purchase made with a credit card as “free” because it is so easy to swipe and forget! Obviously, this is not the case, so you must make it a habit to monitor your credit card statements regularly so you’re aware of your spending while also ensuring that there aren’t any unauthorized charges. You can easily track your transactions in real time by using online banking or mobile apps. Besides, when you follow your spending habits, you are better prepared to avoid overspending while also helping you manage your budget.
Take Advantage of 0% APR Offers
Many credit cards offer 0% APR on purchases for a specified introductory period, which ranges from 6 to 18 months. Therefore, you are not required to pay interest on new purchases made during this period. If you are hoping to make a considerable purchase, you can use a card with the 0% APR offer to pay off the balance before the promotional period ends.
Set Up A Budget Plan
Establishing a well-planned budget is the most effective way to manage your finances. Allocate a portion of your income to essentials, discretionary spending, and savings. With careful discipline, you can stick to your budget and ensure you have sufficient funds to settle your credit card balances each month, thereby avoiding any interest charges.
Final Thoughts
Credit cards are a valuable financial tool, but if they’re not used properly, they can ruin a person’s finances and make them drown in debt. Owning a credit card doesn’t necessarily mean paying interest on it.
On the other hand, you can avoid credit card interest altogether and save a serious amount by practicing the points mentioned above. Of course, doing so demands a lot of discipline and commitment from your end, but it can be entirely possible! What’s more, these strategies help you to stay focused on your financial goals while breaking free from the spiraling cycle of credit card interest so you can put that money into building your wealth instead.
