3 ways to avoid paying interest on your credit card balance

There’s nothing wrong with using a credit card for your daily spending – it’s convenient, and you can rack up great rewards. But none of…
3 ways to avoid paying interest on your credit card balance

Paying interest on your credit card balance. (Shutterstock)

There’s nothing wrong with using a credit card for your daily spending – it’s convenient, and you can rack up great rewards. But none of this is worthwhile if you end up paying interest on those charges.

As of August 2014, the average credit card interest rate is hovering around 15%, so carrying a balance can get seriously expensive over time.

SEE ALSO: Can I use a personal credit card for my business’s expenses?

Luckily, there are three ways to avoid paying interest on your credit card spending. Take a look at the details below:

1. Pay the balance in full every month

The easiest way to avoid paying interest on your credit card balance is to pay it in full every month by your billing due date. As an added bonus, this tactic will also keep your credit in good shape. Here’s why: The two factors that influence your credit score the most are paying your bills on time and keeping the balances on your credit cards low.

To ensure that you’ll have enough available cash to pay your bill in full by the time it comes due, it’s best to keep a budget and track your spending closely throughout the month. This way, you’ll know when you’ve been charging too much and need to scale back.

2. Transfer your balance to a 0% card

While paying your card’s balance in full every month should be a priority, the reality is that expensive emergencies sometimes pop up. If your transmission dies or hot water heater is on the fritz, you might turn to your credit card to solve the problem. But then you’re faced with a new one: how to avoid paying interest on a huge credit card bill.

If you have good credit, one option is to transfer your balance to a card that’s offering an introductory 0% promotion. This will likely give you 6 to 12 months to pay down the charges without incurring any interest.

A few words of caution about this strategy: For one thing, you’ll probably have to pay a fee to complete your transfer. Typically, this is 3% of the total balance you’re moving onto the 0% card. Be sure to factor this into your calculations when you’re deciding if a balance transfer is right for you.

Also, you’ll need to be very careful about making your payments on time during the 0% period. If you miss one payment, the issuer will probably cancel your promotion and you’ll have to start paying interest right away.

Finally, be vigilant about when the 0% period is up and make every effort to pay off your charges before that date.

3. Use savings to pay off the balance

If you’ve charged a balance to your credit card that’s too high for your regular monthly income to handle, another way to avoid interest is to use savings to pay it off. It’s unlikely that your savings account is paying an interest rate higher than your plastic is charging.

Speaking strictly in mathematical terms, you’re better off using savings to avoid getting slammed with credit card interest.

But this approach comes with certain risks, so it should only be used as a last resort. Keeping reserve cash on-hand is an important buffer against serious emergencies, so only dip into it if you really need to. And if you make this move, it’s very important to build your savings back up as soon as possible.

The takeaway: There’s more than one way to avoid paying interest on your credit card balance. Take a look at the ideas above to figure out which one is right for you!

SEE ALSO: How to pay off your credit cards

Lindsay Konsko writes about credit, credit cards, and other personal finance topics for NerdWallet. Our tools and resources empower consumers to make informed financial decisions.