How to Avoid Interest on Your Credit Card
Most of us will experience times when we need to carry a balance on our credit cards. Whether it’s an unexpected expense (like car repairs or a medical bill) or you’re going through a period of declining income, the ability to pay over time can provide some much-needed financial flexibility. However, credit card interest rates can be prohibitive, so it’s vital to minimize the interest you pay.
How to Avoid Credit Card Interest
The key to avoiding interest on your credit card is understanding your card’s grace period. The grace period is the period of time between the end of your billing cycle and the due date during which you can pay off your balance in full to avoid interest charges. Most credit cards offer a grace period of around 25 days.
If you pay your entire statement balance by the due date, you will avoid interest charges on any new purchases made during that billing cycle. However, the grace period usually only applies to new purchases—any existing balances will continue to accrue interest during and after the grace period until they are paid off.
Use your card’s grace period to avoid interest
Here are some tips on how to take advantage of the grace period:
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Make payments on time every month to maintain your grace period. Miss a payment due date just once, and you’ll likely lose your grace period on new purchases until you pay off your entire balance.
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Pay the full balance shown on your statement to receive a grace period on purchases this cycle. Even if you pay a little less, the grace period may be canceled.
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Consider signing up for automatic payments from your bank account so you never miss a payment due date or lose that grace period. Here’s the best way to spread out your automatic payments . And while most automatic payments make your life easier, keep in mind that some can end up costing you a lot in the long run .
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Review purchases during your current billing cycle by logging into your account online. Any new payments will not qualify for the grace period until the next statement period.
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If you have large upcoming expenses to pay over time, it may make sense to open a new credit card and use that introductory 0% APR period for purchases rather than sacrificing the grace period of your existing card. Here are some of the best starter cards with 0% APR for purchases .
Grace periods are one of the best tools to avoid interest charges if you use them strategically. Stay on top of your monthly payment due dates, pay each statement balance in full, and you’ll be able to carry over many purchase balances from one grace period to the next, interest-free.