If you’re using a credit card to buy, you can avoid paying extra interest by following these tips:
Pay off the cards in the order of their interest rates
One of the biggest mistakes people make when paying off their credit cards is not prioritizing payments. If you’re trying to pay off your debt, it’s important that you begin by paying off the card with the lowest interest rate first. This will allow the money that would have gone towards high-interest debt (which could cost thousands in interest over time) to go towards other bills or savings instead.
If a card has an annual percentage rate (APR) of 18%, for example, and another has an APR of 20%, it makes sense to focus on paying off that first one before moving on because it will save you more money in interest over time.
Initiate multiple payments every month
It’s a good idea to make more than required, but don’t worry about overspending. As long as you’re not in debt, the extra money will be used to pay off your credit card balance faster.
To avoid paying unnecessary interest on your purchases, the best thing to do is make multiple monthly payments. The easiest way is by setting up automatic payments from a checking or savings account and having them withdrawn on the due date of each billing cycle so that there are no surprises when it comes time for payment.
Buy low-interest rate cards for spending
While credit cards can be a convenient and useful tool, it’s important to keep your finances in check. If you’re struggling to pay off your balance every month, here are some steps that can help:
- Avoid using credit cards for everyday purchases. Instead of paying with a card, use cash or debit instead so you’ll be more aware of how much money you’re spending on each thing.
- Buy low-interest rate cards for spending only. If you do have a splurge item or purchase planned, consider getting an interest-free card for that purchase only — like the Amazon Prime Rewards Visa Signature Card — and pay the entire balance off before any interest starts building up on this card’s 19.99% purchase APR.
Don’t put medical expenses on credit card
Stop if you’re considering putting medical expenses on your credit card. That’s because medical expenses are not tax-deductible, and they’re not covered by health insurance. To make matters worse, they are also not covered by credit cards. So if you end up paying interest on your balance (and most people do), the money will be going towards interest instead of actual medical bills.
Consolidate your debt by using a 0% balance transfer card
According to professionals at SoFi, “a card with a 0% balance transfer or similar 0% credit card offer could be an enticing option for those who want to make major headway in paying down a credit card balance.”
If you have a high-interest credit card, consider transferring your balance to a card with a 0% introductory APR. This will allow you to avoid paying interest on your current debt and make extra payments toward it during the introductory period.
Here’s how to avoid paying interest on credit card using a card with an introductory 0% APR.
- Transfer your existing balance to a new card with an introductory 0% APR offer (for example, 12 months).
- Make sure that this new card has no annual fee or foreign transaction fees. If the new card charges an annual fee, call them and ask if they’ll waive it for this first year—they may give it to you even if they usually don’t waive annual fees!
- Pay off as much of the transferred debt as possible before the 0% rate ends by making additional monthly payments on top of what’s required each month (this is called “paying ahead”).
Credit cards can be an excellent way to manage your finances, but they also come with many potential pitfalls. So talk to an expert at reputed platforms like SoFi before getting one.
