How to avoid interest charges on a credit card?

Credit cards are a convenient financial tool, offering benefits like reward points, cashback, and improved credit scores when used responsibly. However, the convenience of credit cards comes at a cost—interest charges. If you carry a balance from month to month, you might end up paying hefty interest, which can quickly add up and lead to debt.

This blog provides practical strategies to help you avoid credit card interest charges and manage your finances more effectively.

Understanding Credit Card Interest

Before diving into the tips, it’s essential to understand how credit card interest works. Credit card companies charge interest on the amount you owe if you don’t pay your balance in full by the due date. This interest is usually calculated daily and can compound, making it expensive to carry a balance over time.

Tips to Avoid Credit Card Interest Charges

Here are some extra tips to avoid credit card interest charges:

• Pay Your Balance in Full Each Month
• Utilise the Grace Period
• Understand Your Billing Cycle
• Make Payments Before the Due Date
• Consider Balance Transfers
• Take Advantage of 0% APR Offers
• Set Up Automatic Payments
• Track Your Spending
• Create a Budget
• Avoid Cash Advances

Now let us take a closer look at these pointers.

Pay Your Balance in Full Each Month

The simplest and most effective way to avoid interest charges is to pay your credit card balance in full every month. By doing so, you ensure that you are not carrying any debt into the next billing cycle, thereby avoiding any interest charges on your credit card. This practice also helps you maintain a good credit score and keeps your financial health in check.

Read more: Loans against credit card – explained

Utilise the Grace Period

Credit cards typically offer a grace period between the end of your billing cycle and the due date for payment. During this period, you are not charged interest on new purchases. To make the most of the grace period, pay off your entire balance before the due date. This ensures you are using your card interest-free for that period.

Understand Your Billing Cycle

Knowing your billing cycle can help you plan your payments better. Most credit card companies have a 30-day billing cycle, followed by a due date. Mark these dates on your calendar to ensure you pay off your balance before the interest starts accruing. If possible, set reminders a few days before your due date.

Read more: 10 hidden credit charges that you should know about

Make Payments Before the Due Date

Waiting until the due date to make a payment can be risky if you forget or if there are delays in processing. Instead, make it a habit to pay a few days before the due date. This gives you a buffer period and ensures your payment is credited on time, helping you avoid interest charges.

Consider Balance Transfers

If you have existing credit card debt, transferring your balance to a card with a lower interest rate can save you money on interest charges. Many credit cards offer introductory 0% APR on balance transfers for a specific period, usually 12 to 18 months. However, be mindful of balance transfer fees and ensure you can pay off the balance before the introductory period ends.

Take Advantage of 0% APR Offers

Some credit cards offer 0% APR on purchases for an introductory period, often ranging from 6 to 18 months. This means you won’t pay interest on new purchases made during this period. If you plan to make a large purchase, consider using a card with a 0% APR offer and ensure you pay off the balance before the promotional period ends.

Set Up Automatic Payments

Setting up automatic payments can help you avoid missed payments and interest charges. You can choose to pay the full balance, the minimum payment, or a fixed amount each month. Paying the full balance is ideal to avoid interest, but if that’s not possible, at least ensure you make the minimum payment to avoid late fees and negative impacts on your credit score.

Track Your Spending

Regularly monitoring your credit card statements helps you stay on top of your spending and ensures there are no unauthorised charges. Use mobile apps or online banking to keep track of your transactions in real time. Knowing your spending habits can help you manage your budget and avoid overspending, reducing the likelihood of carrying a balance.

Create a Budget

A well-planned budget helps you manage your finances more effectively. Allocate a portion of your income to essential expenses, savings, and discretionary spending. By sticking to your budget, you can ensure you have enough funds to pay off your credit card balance in full each month, thereby avoiding interest charges.

Avoid Cash Advances

Cash advances are one of the most expensive ways to use a credit card. Interest on cash advances starts accruing immediately, often at a higher rate than regular purchases. Additionally, there are usually fees associated with cash advances. Avoid using your credit card for cash advances unless absolutely necessary.

Avoiding credit card interest charges is all about disciplined financial management and strategic use of your credit card. Remember, a credit card is a powerful financial tool when used responsibly.