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How to Avoid Paying Interest on Credit Cards

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How To Avoid Paying Interest on Credit Cards

Anyone who has a credit card knows the danger that the interest can bring. A simple $10 purchase can quickly cost you $20, $30, or even $50 the longer you take to pay for it. For some, credit cards might be a bad idea from the get-go.

Credit cards aren’t always the bad guy, however. There are many ways you can avoid paying interest on your credit cards, or drastically lower it. Keep reading to learn some of the best ways to nix interest payments and keep more cash in your pockets!

Pay Your Balance in Full on the Due Date

To avoid any interest at all, pay off your credit card in full on or before the due date. By doing this, you can save hundreds, if not thousands per year in interest payments.

If this isn’t an option for you, there are some other ways that you can lower your interest payments. For example, it might be wise to apply for a personal loan with a low fixed interest rate and use that money to pay off your credit cards. Typically, personal loans have interest rates between 5% and 12% for those with average credit scores. The length of the loan will also impact your interest rate, so try lowering the length to keep your payments low.

Keep in mind that this way only works if you are able to get a lower interest rate on your personal loan than your credit cards. Because most credit cards have extremely high-interest rates (20%-30%), many times this is a good option.

Apply for a New Credit Card

Another way to lower your credit card interest is to apply for a new card with an intro APR. How this works is simple. Many new cards will offer deals like 0% APR on balance transfers for the first 12 months. If you’re approved for the card, you can transfer your balance from your card that is accumulating interest to the interest-free card.

There are a few things to keep in mind about this option. The first is to watch out for any balance transfer fees. A lot of cards will charge a small percentage of the balance to transfer it. Typically it will cost around 3 to 5%. This can add up, but as long as you are saving at least 3 to 5% on interest, it would still be worth it.

The other thing to be on the lookout for is to make sure that you keep making the minimum payments. Just because you aren’t accumulating any interest, doesn’t mean you can stop paying altogether. You’ll need to continue making payments on your card. Minimum payments are typically less than $50, so be sure to add that to your budget each month to avoid any late payment fees.

While theoretically, you could continue to do this with new cards over and over, we do not recommend it as it can exponentially increase your debt.

Make Payments Frequently

Because credit card interest is accumulated daily (more on this below), making payments often is a great way to lower the amount of interest you pay.

Split Usage Between Multiple Cards

By splitting your card usage up between multiple cards, you can lower your overall interest payments between them. If you have one card when the payment is due on the 15th of each month and another card where the payment is due at the 1st of the month, use the first card from the 15th-31st and your alternate card between the 1st and 14th of the month. This will maximize the time you have to pay your card.

How does credit card interest work?

Credit card companies will charge you interest when you do not pay your balance by the due date each month.

Interest is Calculated Daily

When you carry a balance on your credit cards, interest will add up each day you carry a balance. This interest is then added to your balance so your interest for the second day will be even more. Carrying balances can exponentially increase the amount of interest you’ll end up paying so be sure to make frequent payments, even if you cannot pay the full balance.

To figure out how much interest you will be charged each day, you’ll need to divide your credit cards APR by 365. For example, if your credit card had a 27% APR, each day you would be charged an interest rate of .0739%.

What about late payment fees?

Credit card companies will not only require you to pay interest when you do not pay the balance in full but will also charge late payment fees if you forget to pay your credit card on time. When you sign up for your card, you will receive the terms of your card. This will explain any minimum payments, penalties, fees, and how interest is calculated. Each month, you are required to make a minimum payment. If you do not make this minimum payment, you will be assessed a late payment fee. Typically this will cost you around $35, which is oftentimes more than the minimum payment.

How to avoid late payment fees

The best way to avoid late payment fees is to set up and automatic payment of the minimum payment before the due date. Just remember that this amount will be automatically deducted from your bank account each month. The last thing you want to do is overdraw your bank account AND get assessed a late payment fee, so make sure the funds are available!

Is credit card interest tax deductible?

As tax season approaches, many people will be looking to save on their tax bill. One of the top questions people will ask is “Is credit card interest tax-deductible?”

In short, no, it is not deductible. But there is an exception. If you are a business and the credit card is used for business purposes, then you can deduct the interest. Always consult your tax professional to ensure that you can take this deduction.


Credit cards can be a blessing and a curse. They are convenient ways to make everyday purchases and some offer great rewards helping to offset some of the costs. On the other hand, credit cards can be costly. Between interest and fees, you can end up paying hundreds, if not thousands of dollars per year in penalties.

It’s always wise to minimize the amount you pay in interest and fees. The best way to do this is to set up automatic payments to avoid forgetting to make a payment and to make payments frequently. You can also take advantage of credit card offers if you need to carry interest. Many cards will offer a 0% intro APR, which can save you hundreds!

Be sure to check out our credit card reviews here to see our top-rated credit cards and which one might be the best fit for you!

Forrest is a personal finance, entrepreneurship, and investing enthusiast dedicated to helping others obtain life long wealth. He owns several different blogs and is also passionate about health and fitness.


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