How To Avoid Interest on Credit Cards

Dealing with credit card debt has always been tough, but getting out of debt is harder now than it’s ever been. That’s because the average interest rates on credit cards have been steadily increasing, from around 15% in 2019 to over 21% in 2024, and many cards now have rates up to 30%.

For anyone carrying credit card balances, the monthly charges are steep. That’s why it’s crucial to develop a strategy for managing this high-interest debt ASAP. Here’s what you can do.

1. Pay Your Balance in Full Each Month

Credit card interest is charged on the balance you carry over from one month to the next. One of the best ways to avoid charges is to pay the full balance — not just the minimum payment amount — by the due date each month.

If you’re not able to pay the full amount, you can reduce your interest charges by paying your balance down as low as possible. You might even want to pause your contributions to your savings or your retirement account and use the money to eliminate the debt ASAP since the charges are likely to exceed what you earn on your savings.

Here’s a look at what you could save by paying extra:

Sample Credit Card Interest Charges By Payment

2. Take Advantage of 0% APR Promotions

Some debtors can buy themselves time by moving their debt to a new credit card with 0% introductory APR. Also known as balance transfer credit cards, these cards usually give you a period of 12-18 months or more where interest is not charged on the balance you transfer from another card.

Just note that you might be charged interest on purchases during the introductory period, and you’ll still have to make a minimum monthly payment.

Balance transfer credit cards have incredibly complex terms and conditions, so be prepared to read the fine print, too. Here are some common rules to keep in mind:

• There’s usually a short window of time to make your balance transfer at 0% APR.
• After the introductory period, the APR often shoots up to nearly 30%.
• If you make a late payment, your 0% APR offer will be canceled.

If you’re thinking about applying for a balance transfer card, we recommend making a plan for how you’ll pay off the debt before the 0% introductory period expires.

3. Make Multiple Payments Within a Billing Cycle

You can reduce your interest charge by making more than one payment to your credit card each month. That’s because, if you carry a balance beyond your payment due date, your interest charges will be calculated based on the average daily balance you carried during your billing cycle.

So instead of waiting to send one payment right before the due date, you might consider sending a payment after each paycheck or paying a smaller amount each week. Automating periods with this strategy will make it even more effective.

In addition to reducing your interest charges, this approach can help you get in the habit of carrying a lower, more manageable balance. Plus, it can improve your credit scores, since they’re partially based on the amount you owe on credit cards.

4. Use Hardship Assistance Wisely

If you’re facing a financial emergency, such as job loss, a medical crisis, or divorce, your creditor might be willing to help you out. Some credit card companies offer Credit Card Hardship Programs that temporarily reduce the interest on your card to as little as 0%.

But be sure to use these programs with caution, since they don’t always result in lower interest rates. In fact, some creditors will agree to a “deferment period” where you have $0 payments, but they’ll still charge you interest during that period.

5. Avoid Cash Advances

If you’re looking to avoid interest charges, a credit card cash advance is one of the worst moves you can make. Cash advances let you withdraw money from your credit card account but at a very high cost. Here’s what makes them so expensive:

• There’s no grace period, so you start accruing interest immediately.
• The interest rate on cash advances is higher than on purchases, sometimes up to 25% APR or more.
• You typically pay a fee up to 6% of the amount you withdraw.

Major financial institutions, including American Express, Chase and Bank of America suggest that credit card cash advances are just for emergencies. If you need cash in a pinch, look into a lower-cost option like a personal loan instead.

6. Monitor Your Spending and Credit Card Usage

Around a third of people use credit cards for most of their purchases, but the best way to avoid interest on credit cards is not to use them at all. Whether you’re already in debt, or considering applying for your first credit card, there’s probably a better way to cover your expenses.

To get away from credit card spending, aim to follow this rule of thumb: Only spend money you’ve already set aside. When you use your own cash to cover expenses, you don’t have to worry about accruing any interest charges. But with credit cards, you usually do the opposite: spend money and find a way to pay it back later.

If you need help curbing credit card spending, try one or more of these approaches:

• Set a daily or weekly spending limit for yourself, based on your budget.
• Check your credit card statement each week to ensure you’re not overspending.
• Talk to an NFCC-certified credit counselor like those at InCharge Debt Solutions to get help creating a budget and finding the best debt-management strategy.

7. Negotiate a Lower Interest Rate

There’s no guarantee a creditor will reduce your interest rate, but for some people, it’s a possibility. Creditors are more likely to negotiate lower rates with you if your income and/or credit scores have increased since you opened an account. Here’s how to negotiate:

1. Shop around for credit card pre-approvals (with no hard pull to your credit reports) to see if you qualify for a lower rate.
2. Check the creditor’s website to find the lowest interest rate currently available for your credit card.
3. Give the creditor a call. You may need to ask for a supervisor if the customer service rep isn’t able to approve your request.
4. Mention your research on available rates. If you have a long history of on-time payments, mention this too, and be sure to call out any improvements you’ve made to your credit scores and income.

Mastering Credit Card Interest

Should you stop using credit cards altogether? It depends. If you’re not able to control your spending, it can help cut off the temptation and the high-interest debt that comes along with it.

Yes, credit cards help you build up your credit scores. But you don’t have to use them much in order to build good credit. In fact, you can build your scores by making just one small purchase on a credit card each month and then paying it off by the due date, or by making on-time payments on a loan.