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How to avoid interest on your credit card

Avoiding interest could be as simple as these five tips.
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Written by Lena Borrelli, Contributing Writer on
Reviewed by Marc Wojno

Credit cards with APRs as high as 36% can cost you a lot of money just on paying the interest, and countless many Americans are utilizing high interest rate cards with APRs in the mid- to upper-20% range. The Consumer Financial Protection Bureau (CFPB) estimates that Americans pay $120 billion each year just in credit card interest and fees.

Save your money by paying less on interest. Let ZDNet help you find ways to avoid interest on your credit cards.

What affects your credit score?

Credit cards can be a great way to build your credit reputation. To be eligible for cards with low interest rates and fees, you first need a good credit score. Your credit score is affected by five factors:

  • Payment history: This is one of the most important factors because it shows lenders that you can be relied upon to repay what you borrow. According to Experian, payment history accounts for 35% of your overall FICO credit score.  
  • Amount due: Creditors will also look at your total debt to see if you can handle additional payments.  
  • Credit ratio: It is also important to have a good debt-to-credit ratio, also known as a credit utilization ratio. This shows how much available credit you have versus how much you owe. It's wise to keep your revolving credit utilization below 30%, if possible.
  • Credit diversity: Credit diversity is also important because it shows that you can handle a variety of different loans, such as your home mortgage, car loan, student loan, or your credit card.  
  • New credit: If you have too many new accounts, creditors will worry that you have overburdened yourself financially, so they may not want to extend credit.

Be sure to regularly check your credit score. It may take a while for your score to increase, but it's worth it. 

What is a credit card grace period?

A credit card grace period is an interest-free timeframe where you can make purchases without any interest. According to 2009's Credit CARD Act, this is a mandatory interest-free period covering a minimum of 21 days, lasting from the last day of your credit card billing cycle to the bill date. If you make your payment before your billing date, you will not pay any interest on any new and unpaid purchases and transfers.

An interest-free period can also cover the first few months of your credit card when there is a promotional offer. Before you sign up for a new credit card, compare introductory offers to see if there is one that can save you money. 

How can you avoid interest on your credit card?

You can easily lower interest on your credit card -- or eliminate it altogether -- when you follow these tips: 

Pay in full

Eliminate interest when you pay your monthly statement in full. Not only can a late payments add interest, but it can affect your credit score, too. When you pay off your entire balance each month, you skip the interest typically attached to purchases.

Space out your purchases

There's nothing like the excitement of a new card, but hold off on that shopping spree. If you take time between purchases, it is far easier to pay what you owe. If you have a big purchase to make, save it for a low-interest credit card so you don't stack up the interest on that big-ticket item. 

Sign up for a new card

If you have good credit to get a new credit card, consider signing up for a card with a promotional APR. A card issuer, for example, could offer you an introductory 0% APR lasting more than a year, saving you money in the meantime. There are also buy now, pay later (BNPL) plans such as Affirm that allow you to make your purchases and then pay them off in smaller payments, making those larger purchases a bit more attainable. 

Consider a balance transfer credit card

balance transfer credit card allows you to take all of your debt and move it to one card with a single bill. You could also use this opportunity to select a new credit card with no interest for a certain period, giving you more time to pay off your debts. Just watch out for balance transfer fees which can cut into your savings.

Make a budget

Knowing what you owe -- and when -- can help ensure that you make timely payments and that you don't overspend. Make a budget showing your monthly expenses, plus any extra items you may need to buy. It can help you stay on track with your spending, so you don't accrue interest and risk falling into debt. 

The bottom line

Paying interest is a fact of life when it comes to using credit cards, but there are ways to pay less, or avoid, interest on cards if you're careful. 

Pay close attention to your accounts so you always know what you owe, and when. A new credit card could be what you need to reduce, or eliminate, short-term interest. Even if you can't qualify for a new credit card, little things such as creating a budget and watching your spending can contribute to a low-interest rate lifestyle. 

You'll be surprised by how much money you can save when you avoid interest on your credit card. 

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