7 Useful Ways to
Avoid Interest on a Credit Card [2023]

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Updated: May 11, 2023
author photo Written by Louis BakerUpdated: May 11, 2023
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Are you struggling with mounting credit card interest charges? Worry no more! This article will walk you through various approaches to avoid or reduce interest fees, help you comprehend credit card interest calculations, and introduce alternative financing solutions.

Dive in and uncover the keys to tackling credit card debt, paving the way for a brighter financial future.

7 Methods to Help Avoid Interest on a Credit Card

Method 1 Pay Your Credit Card Bill in Full Every Month

A straightforward and reliable method to avoid interest on your credit card is by paying off your credit card bill in full each month before the due date. 

By doing so, you can take advantage of the interest-free Grace Period. The Grace Period is the time between the credit card Statement Closing Date (the last day of your billing cycle) and the Payment Due Date. If you pay back the balance during this period, you will not be charged interest on the balance, and you can maintain a good credit score.

Method 2 Use a Credit Card that Charges 0% APR on New Purchases

With a 0% APR benefit, you'll only need to make the Minimum Payment listed on your monthly bill within a certain timeframe (usually 12 to 18 months). You can leave the remaining Statement Balance unpaid until the 0% APR benefit ends without incurring any late fees or interest charges.

For example, if you spend $1,000 on a card with a 0% APR for 12 months, you can make monthly payments of $83.33 without incurring any interest charges.

To obtain 0% APR, you can open a new credit card. Banks generally list relevant information under "0% Intro APR for..." in the introduction of card benefits and in the Rates and Fees section.

Method 3 Consolidate Debt with a Balance Transfer Credit Card

A balance transfer credit card allows you to transfer high-interest debt from one or more credit cards to a new card with a lower interest rate, often 0% for a promotional period.

For example, if you have a $5,000 balance on a card with a 20% APR, you could transfer it to a balance transfer card with a 0% APR for 12 months. This would allow you to make monthly payments of about $416.67 without incurring any interest charges during the promotional period. 

When considering applying for a balance transfer credit card, it is important to research and understand the various fees and terms involved.

In addition to balance transfer fees, you may also encounter other fees, such as late payment fees. Before making a decision, make sure to read the fine print and understand all potential fees, and ensure that you can pay off the balance before the promotional rate expires.

Things to Know About Balance Transfer Credit Cards

  • Balance transfer fees: When you use balance transfer cards, you are typically charged a fee of 3% to 5% of the transfer amount. The regulations regarding these fees vary between different lenders and are often written in inconspicuous terms. Be sure to read through the terms carefully before applying.
  • Promotional period: While a 0% interest rate may seem like a great deal, it is important to understand how long this rate will last (usually between 12 to 18 months)  and what the standard APR will be once the promotional period ends. 
  • Credit score impact: If you're applying for a new credit card for a balance transfer, be aware that doing so will temporarily affect your credit score. It is important to have a plan in place to pay off the balance before the promotional rate expires to minimize any negative impact on your credit score.

Method 4 Consider Deferred Interest Financing

Deferred interest financing is a type of promotional financing offer provided by some retailers where interest is temporarily waived for a specified period.

Essentially, you may purchase anything you want without paying any interest, but there is a catch: you must pay off the entire balance before the promotional period ends.

Failing to meet this requirement may significantly increase the interest you are required to pay, as interest will accrue from the original date of purchase, which will increase the total amount you owe.

For example, let's say you purchase a $2,000 item using deferred interest financing with a 12-month promotional period. If you pay off the entire $2,000 within 12 months, you will not be charged any interest.

However, if you fail to pay off the full amount within the promotional period, interest will be applied to the entire $2,000 from the date of purchase , potentially resulting in a significant increase in your overall cost.

Method 5 Opt into a Buy Now, Pay Later Plan

The Buy now, pay later (BNPL) Plan is a convenient way to make purchases without having to pay the full amount upfront. This option allows you to pay over multiple installments, making it easier to manage your budget.

This flexible payment option is often offered by retailers at the point of sale and can also be accessed through third-party providers such as Afterpay, Klarna, or Affirm.

While these plans can help you avoid interest charges, it's crucial to make timely payments and understand the terms and conditions to avoid late fees or other penalties.

Method 6 Use a Debit Card or Cash

Another way to avoid interest charges is to use a debit card or cash for your purchases instead of a credit card. By doing so, you are spending money you already have, and you won't have to worry about incurring interest charges.

Method 7 Avoid Cash Advances

Cash advances are a type of short-term loan taken against your credit card, usually obtained through an ATM or bank.

It is important to carefully consider your options before taking out a cash advance. While it may seem like an easy solution to access cash quickly, the high-interest rates and fees can quickly add up, putting you in a difficult financial situation.

4 Methods to Reduce Credit Card Interest

Method 1 Use a Debt Repayment Method

If you're already carrying a balance on your credit card, creating a debt repayment plan can help you reduce interest charges. Two popular debt repayment methods are the debt avalanche and debt snowball methods:

  • Debt Avalanche: This plan prioritizes high-interest debt. Here's how it works:

    (1) Rank your debts by interest from highest to lowest. 

    (2) Make minimum repayments on all debts.

    (3) Allocate the remaining funds available for repayment to the debt with the highest interest rate.

    (4) After paying off the debt with the highest interest rate, move on to the next debt on the list, and so on, until all debts are paid off.

  • Debt Snowball: This plan prioritizes low-interest debt. Here's how it works:

    (1) Rank your debts by amount from lowest to highest. 

    (2) Make minimum repayments on all debts.

    (3) Allocate the remaining funds available for repayment to the smallest debts.

    (4) After paying off the smallest debt, move on to the next debt on the list, and so on, until all debts are paid off.

Both methods can help you save on interest charges and pay off your debt faster.

Method 2 Make Multiple Monthly Payments to Chip Away at a Big Balance

Multiple small payments generate lower interest than one-time repayments at the due date. Because these small payments can effectively reduce the balance which is included in the interest calculation, thereby reducing the accumulated interest.

Method 3 Tap into Savings to Pay Down Debt

If you have money in a savings account, you might consider using it to pay down high-interest credit card debt. While it's essential to maintain an emergency fund, using some of your savings to eliminate or reduce high-interest debt can be a smart financial move.

The interest you're paying on your credit card is likely much higher than the interest you're earning on your savings, so paying off the debt could save you money in the long run.

Method 4 Consider a Personal Loan

Using a personal loan to consolidate your credit card debt can be another effective way to reduce your interest charges. 

Personal loans offer several advantages over credit cards. For one, they typically come with lower interest rates, which can save you money in the long run. Additionally, personal loans have a fixed repayment schedule, making it easier to manage your debt and budget your monthly payments. 

Combining all of your credit card debts into a single loan can be an effective way to deal with debt. By doing this, your debts are much less likely to be missed compared to multiple credit card debts and result in significant savings on missed payment fees.

To make the most of this strategy, ensure that you:

  • Find the best interest rates and terms: Before formally applying for a personal loan, it is recommended that you compare the interest rates and fees of various lenders to find the best option.
  • Pay off credit cards with a loan: It is recommended that you use a personal loan to pay off your credit cards in full so that you can consolidate your debts and avoid the high-interest rates that accrue on credit card balances.
  • Prevent debt accumulation: To prevent additional interest during the loan repayment process, it is recommended that you avoid using credit cards for new consumption until the loan is fully repaid.

What is Credit Card Interest?

For credit card holders, credit card interest refers to the additional cost that needs to be paid to the lender in addition to the principal after spending with a credit card. This cost is usually expressed as an Annual Percentage Rate (APR).

After using a credit card for consumption, there is usually a fixed repayment date. If the repayment is not paid before the due date, interest will be incurred on the unpaid balance.

When is Credit Card Interest Charged?

Usually, if you pay off your entire balance by the due date specified by the lenders, you will not be charged any interest. However, if you are unable to pay off your balance in full, you will have a revolving balance.

This means that the remaining balance will be carried over to the next billing cycle, and you will be charged interest on the amount that is carried over. 

Therefore, it is recommended to pay off your entire balance by the due date to avoid any additional fees or charges. Additionally, some lenders may offer a grace period or a low-interest rate for new customers, so it is important to check with your lender to see if you are eligible for any special offers or promotions.

A grace period is a set number of days (usually 21 to 25 days) between the end of your billing cycle and your payment due date, during which you can pay off your balance without incurring interest.

However, certain transactions, like cash advances and balance transfers, may not have a grace period and start accruing interest immediately. It's essential to read your credit card agreement to understand when and how interest is charged for different types of transactions.

How Does Credit Card Interest Work and Calculate?

Before calculating credit card interest, you need to determine the outstanding balance of the credit card and the daily interest rate. The daily interest rate is calculated based on the Annual Percentage Rate (APR) of the credit card, which needs to be divided by 365 (the total number of days in the year).

To calculate the interest charges for a billing cycle, credit card companies typically use either the average daily balance or the daily balance method:

Average Daily Balance Method: This method calculates interest by first determining the average daily balance on your credit card during the billing cycle

This method calculates interest charges by multiplying the credit card balance for each day during a billing period by the card’s finance charge, which is stated as the card annual percentage rate (APR). Thus, there are three components for calculating interest charges using the average daily balance method:

  • Annual percentage rate (APR)
  • Number of days in the billing cycle
  • Average daily balance

The formula for calculating interest charges appears as follows:

(APR x No. of Days in the Billing Cycle x Average Daily Balance) / 365.

Daily Balance Method: This method calculates interest on each day's balance separately. The credit card company multiplies the daily balance by the daily interest rate for each day in the billing cycle and then adds up the interest charges for all days to determine the total interest for that period.

Let's assume you have a credit card with a $3,000 balance and a 20% APR.

Example 1: If the credit card company uses the average daily balance method

First, convert the APR to a daily interest rate: 20% ÷ 365 = 0.0548% daily rate. Your balance remains constant throughout a 30-day billing cycle; the calculation would be as follows:

  • Average daily balance: $3,000
  • Total interest charges: $3,000 (average daily balance) × 0.000548 (daily interest rate) × 30 (number of days in the billing cycle) = $49.32

In this example, you would be charged $49.32 in interest for that billing cycle. Keep in mind that the actual interest charges may vary depending on your daily balance fluctuations and the method used by the credit card company to calculate interest.

Example 2: If the credit card company uses the daily balance method to calculate interest.

The daily interest rate remains the same: 20% ÷ 365 = 0.0548% daily rate.

For the sake of convenience in calculation, we assume that the cardholder spends $100 per day on payments and there are no additional transactions during a 30-day billing cycle. In this scenario, the interest is calculated as follows:

Day 1: $3,000 × 0.000548 = $1.64

Day 2: $2,900 × 0.000548 = $1.59

Day 3: $2,800 × 0.000548 = $1.53


Day 30: $200 × 0.000548 = $0.11

To find the total interest charges for the billing cycle, you would add up the interest charges for each day:

  • Total interest charges: $1.64 + $1.59 + $1.53 + ... + $0.11 = $24.66

In this example, using the daily balance method and making daily payments of $100, you would be charged $24.66 in interest for the billing cycle. 

Different Types of Credit Card Interest

Variable Rates

Variable interest rates are tied to an index, such as the prime rate or the U.S. Federal Reserve's federal funds rate. These rates can fluctuate over time as the underlying index changes. 

Typically, variable interest rates are expressed as the sum of the index rate plus a margin, which is determined by the card issuer based on factors like your creditworthiness.

For example, the prime rate in the summer is 4.75 percentage points. The card issuer adds a margin of 10-12 points for customers with good credit to come up with an APR of 14.75-16.75 percentage points. In the fall, the prime rate becomes 4.55, and the variable APR turns to 14.55-16.55, accordingly.

Fixed Rates

Fixed interest rates, as the name suggests, remain constant over time and do not fluctuate with changes in an underlying index. 

A fixed-rate card cannot change unless the card issuer gives the cardholder a notice in advance. Cardholders either accept the change or decide not to use the card at the newer rate. Fixed rates are generally higher than variable rates, with the consumer paying a premium for the card’s relative stability.

Fixed-rate card companies also can change rates if: 

  • You are more than 60 days late with payments
  • You completed a debt management program 
  • You had a promotional fixed rate that has ended 

The advantage of a fixed rate is that it’s stable. The card company must specify how long that rate will be fixed and give you a notice when it changes the rate.

Introductory and Promotional Rates

Introductory and promotional interest rates usually are offered for a specified time and for specific uses. If you're new to credit cards, card issuers typically incentivize you to make new purchases or balance transfers by offering lower interest rates.

Some cards offer a cash bonus if you spend a specified amount in a specified time. Other promotional offers include zero-percent interest on purchases for as long as 18 months or 10% off an item purchased from the retailer offering you a card.

These special rates typically last for a specified period, such as 6, 12, or 18 months, after which the interest rate reverts to the standard rate for your card.

It's crucial to understand the terms and conditions associated with introductory and promotional rates, as they may come with specific requirements, such as making minimum monthly payments on time. Failing to meet these requirements could result in the promotional rate being terminated early and the standard interest rate being applied.

Deferred vs. Standard Interest

Deferred interest and standard interest are two different ways credit card companies may charge interest on your balance. Understanding the difference between these two types of interest is essential to manage your credit card debt effectively.

Deferred Interest

Deferred interest refers to the temporary waiver of interest during a specific promotional period. 

This means that any purchase made with a credit card during the promotional period will not generate additional interest. However, the interest-free period is limited, if the credit card balance has not been paid off by the end of the promotional period, interest will still be generated.

If you fail to pay off the balance within the specified timeframe, however, interest charges will be retroactively applied from the original purchase date, which can result in a substantial increase in your overall cost.

Standard Interest

Standard interest is the regular interest rate that applies to your credit card balance when no promotional rates are in effect. 

The standard interest rate for your credit card is influenced by your credit score and the type of credit card you have and is ultimately determined by the card issuer. It is usually expressed as an Annual Percentage Rate (APR).

Under normal circumstances, interest on your credit card is calculated based on the standard interest rate. Only the outstanding balance is charged interest, and the portion that is paid on time usually does not accrue interest.

What is a Credit Card Grace Period?

A grace period is a set amount of time during which you won't be charged interest on your credit card purchases. This period can help you by providing some extra time before interest begins to accrue. Properly utilizing this grace period could help you avoid paying interest on your purchases altogether.

How Long is the Grace Period on a Credit Card?

The length of a grace period can vary depending on the credit card issuer and the specific card offer. The Credit CARD Act of 2009 mandates that credit card issuers must provide at least a 21-day grace period , but some issuers may offer longer grace periods.

To find the exact length of your grace period, you can review your credit card agreement or contact your card issuer directly.

Can You Extend Your Grace Period?

The credit card grace period is usually clearly stipulated by the card issuer and generally won’t be extended easily because it is set according to the policy and relevant laws (such as the Credit CARD Act of 2009).

If you're unable to pay off your balance within the grace period, you can try contacting your card issuer and explaining the financial hardship you're facing, requesting a temporary reduction in interest rates, a payment plan that will help with repayments or other forms of assistance.

Keep in mind that these options may not be available for all cardholders and may come with additional requirements or consequences, such as fees or potential impacts on your credit score.

How to Make the Most of Your Credit Card Grace Period

Taking advantage of your credit card's grace period can help you avoid interest charges and manage your credit card debt more effectively. Here are some tips on how to make the most of your grace period:

1. Understand Your Grace Period

To understand the grace period on your credit card, check your credit card agreement. It will tell you how long your grace period is, usually between 21 and 25 days, and what conditions apply. 

The grace period only applies to purchases; cash advances or balance transfers may not be covered. If you're not sure about your grace period, ask the card issuer for help.

2. Pay Your Balance in Full

To avoid interest charges, it's essential to pay your entire credit card balance within the grace period each month. By doing so, you can benefit from interest-free financing for your purchases and maintain a healthy credit history.

3. Monitor Your Billing Cycle

If you want to minimize the credit card interest and make full use of the grace period provided by the lender, it is recommended that you check and record the billing cycle of your credit card in advance (including the billing date and repayment deadline). By doing so, you can plan your consumption reasonably within the billing cycle.

4. Set up Payment Reminders or Automatic Payments

To prevent additional interest and other charges resulting from missed payment due dates, it is recommended that you activate the automatic repayment function or set up repayment reminders, card issuers usually provide these functions or services.

And it should be noted that you must ensure that the account used for automatic repayment has sufficient funds to cover the repayment amount; otherwise, overdraft fees or refunded payment fees may be incurred.

5. Make Payments Early

If possible, make your credit card payment before the due date. Paying early not only ensures that you avoid any late fees or interest charges but may also help you improve your credit utilization ratio, a key factor in determining your credit score.

Can I Negotiate a Lower Credit Card Interest Rate?

Yes, it is possible to negotiate a lower credit card interest rate with your card issuer. While there's no guarantee that your request will be approved, taking the initiative to discuss your interest rate with your issuer could result in potential savings on interest charges. 

Here are some tips on how to negotiate a lower credit card interest rate:

1. Research and Prepare

If you want to get a lower interest rate, it is recommended that you collect some materials in advance (such as repayment history and credit scores with other banks) to prove that you have good credit.

In addition to reviewing your account information, it is important to research competitive credit card offers. This will give you a better understanding of current market rates and any potential alternative solutions that may be available to you. For example, you may find that other credit cards offer lower rates or better rewards programs.

By taking the time to gather and analyze this information, you can better prepare for negotiations with your card issuer. You will have a clearer understanding of your current credit card account as well as alternative solutions that may be available to you. This can help you make more informed decisions that may save you money in the long run.

2. Be Polite and Professional

When speaking with a customer service representative or account manager, remain polite and professional. Clearly explain your request for a lower interest rate and provide reasons for your request, such as having a strong payment history, good credit score, or the availability of lower interest rates from other card issuers.

3. Highlight Your Loyalty

When communicating with your credit card company, mentioning that you've been a long-time customer can be beneficial. By emphasizing that you have been using your card responsibly and paying on time, you demonstrate that you are adept at managing your finances. 

Proving that you are a reliable customer with a good credit history may increase the likelihood of receiving special deals or offers from your credit card company. Remember to maintain good credit habits to ensure financial stability and success in the future.

4. Be Prepared to Negotiate

Don't worry if your first request is turned down. Negotiation is often part of the process. Think about what went wrong and how you can improve your request. 

You could give more evidence or data to support your request. Or you might need to ask a higher-level person in the company or speak to a supervisor. Be ready to explain your position and provide evidence to support your argument. Stay professional and polite and be open to possible solutions.

The goal of negotiation is to find a solution that works for both sides. If you're prepared, do your research, and stay flexible, you'll get the results you want.

5. Consider Other Options

If your card issuer is unwilling to lower your interest rate, consider other options, such as transferring your balance to a card with a lower interest rate or a promotional 0% APR offer.

Be sure to weigh the potential costs of balance transfers, including fees and the expiration of promotional rates, against the potential savings in interest charges.


This article offers practical strategies to avoid interest on credit cards, such as timely full payments, using 0% APR offers, and considering alternative financing options.

It also discusses the importance of understanding credit card interest, grace periods, and negotiation tactics for lower rates. By employing these methods, cardholders can effectively manage their debt and minimize interest charges.

author photo

Written by

Louis Baker


Louis Baker started his career in 2017 by contracting with Experian. He also became a part-time content creator in various fields such as insurance, personal finance & investment, etc.

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