Credit cards are a form of loans that charge the highest interest rates. Without being careful, you could end up paying more than 20% Annual Percentage Rate (APR) on the outstanding balance in your account.
According to Creditcards, the average interest on credit cards is 16.03%. This percentage is high and once you accumulate a huge outstanding balance on your account; it will be difficult to pay it off.
There are techniques you can use to avoid paying these high-interest charges.
In this article, we are going to give you tips you can use to avoid paying high interest on your credit cards.
How to avoid paying interest on credit cards?
The following tips will help you pay less to no interest charges on your credit cards.
- Make your payments on time: The interest charges are applied to the amount of money you used and did not pay back at the end of the payment period. So, if you use your cards, make sure that you pay them off before the deadline. It is also important to not wait for the deadline. There are chances that your payments may not go through. For this reason, it is a good idea to make your payments at least a week before the deadline. Making your payments on time will also help you build your credit score.
- Reduce your credit card limit or credit usage: Credit cards can be lifesavers or destroyers depending on how you use them. Some people are tempted to buy everything they get their hands on without realizing that they must pay their banks back. If you cannot control your spending, you can always request a lower credit line. This way, you will pay fewer interest charges even if you use all your limit. You should always avoid spending every penny you have on your credit cards. Another good idea is to use a small percentage of your credit limit. Not only that it makes it easy for your to pay it off, but it also helps you build your credit score.
- Try 0% APR credit cards: Some financial institutions provide 0% Annual Percentage Rate(APR) cards especially in the first year you opened the account. They do this to attract more people into using their services. If you are not doing well with your current credit cards, try another card with 0% APR for the longest time possible. Keep in mind that this card will switch to a high APR later on. You must also pay the minimum monthly payment required on your outstanding balance. Tip: Before your high APR kicks in, pay off the balance on your credit card to avoid paying interest on it.
- Avoid skipping a payment: Every month, there will be a minimum payment required. You must always try your best to make this payment. Without meeting the minimum required payment, you could end up paying more interest charges, and related penalties.
- Try cards with the highest rewards: Cash rewards can help you minimize your expenses. For example, if you have a 5% cash rewards card for groceries and gas; you will be saving that percentage on those purchases. In the end, your balance will be less due to this cashback.
- Â Use your credit card only for things you need. By using your card only for things you need, your credit usage will be lower. As a result, you will be able to pay off all your outstanding balance every month.
- Have a plan on how to pay your balances. Last but not least, have a plan for all your credit card payments. You need to make sure that all your cards are paid off before the end of the payment period. Without a plan, you could forget how much to pay on every credit card and when to make these payments.Â
