Credit card interest is expensive, but you can reduce or eliminate it.
While credit card interest rates edged lower toward the end of 2024, the average credit card interest rate is still a little high at 21.47%, according to the Federal Reserve. Ideally, it’s recommended that you aim to pay off balances each month to avoid interest charges. But if that isn’t possible, there are ways to reduce the interest you pay.
[Read: Best 0% APR Credit Cards.]
How to Avoid Paying Interest on a Credit Card
The simplest way to avoid credit card interest charges is never to carry a balance. You can do this by:
— Paying your bill in full. If you pay your statement balance on time each month, you won’t be charged interest on your transactions. “Paying your credit card in full every month is the best way to avoid interest payments,” says John Schmoll, founder of the personal finance website Frugal Rules.
— Moving debt to a new balance transfer credit card. When you’re faced with a balance you can’t pay in full by the due date, a 0% APR on balance transfers can save on interest. Just know that you will likely pay a fee, usually 3% to 5%, to transfer each balance.
— Timing major purchases. Before you book a big trip or buy a houseful of furniture, look at your budget and card statement closing date to take advantage of the grace period.
— Considering deferred-interest products. Speaking of buying a houseful of furniture, some stores offer deferred-interest credit cards. Just know that these products come with a slight catch: If you don’t pay your balance in full by the end of the promotional period, you will owe interest on the original amount, not just what you have left to pay.
— Opening a 0% introductory APR card. If you need more than a month or two to pay for your purchases, a 0% APR card can offer an interest-free way to do so. Just be sure you can pay off the balance before interest charges apply.
— Checking if buy now, pay later plans are available. If you’re purchasing something with a shocking price tag, check whether you can split payments up into more manageable doses with a buy now, pay later plan.
If you’re planning a balance transfer, consider whether you can avoid running up card balances again, says Jeff Richardson, VantageScore’s senior vice president of marketing and communications. “A concern is going back to that card that doesn’t have a balance,” Richardson says. “Now you have two balances, two interest rates, and it really will begin to be a challenge to meet those obligations.”
[Read: Best Balance Transfer Cards]
How to Reduce Your Credit Card Interest
If completely avoiding interest isn’t possible right now, decreasing your debt by consolidating it or making extra monthly payments can help alleviate interest-rate stress. “First and foremost, pay down those balances as low as you can,” Richardson says.
Here are some ways to reduce your credit card interest charges:
— Choose a debt payoff strategy to lower your balance and your interest charges. Use the debt avalanche, snowball or blizzard method to pay off credit card debt. Choose what works best for you and get started.
— Make multiple monthly payments to chip away at a big balance. Repaying your full balance might be more than you can handle at once, but could you split it up over two paychecks or make smaller weekly payments?
— Consider a debt consolidation loan or a balance transfer credit card. You can move your high-interest credit card balances to a debt consolidation loan or a 0% APR balance transfer card. You will still pay interest on a loan or a fee on each balance transfer, but these costs are less than allowing credit card balances and interest charges to grow unchecked.
How to Negotiate a Lower Credit Card Interest Rate
It’s possible to negotiate lower credit card interest rates with your card issuers to help you put a bigger dent in your debt. Start with the card you’ve had the longest that has a strong payment history. You could also begin with the credit card that has the highest rate unless you haven’t had it long.
Call the credit card issuer and ask for a lower interest rate, explaining why you are seeking a reduction. Generally, issuers are amenable to interest-rate breaks, though Richardson says getting one may be easier for borrowers with low-risk behaviors. Low-risk borrowers tend to have low balances and don’t miss payments.
Ask politely what the issuer can do for you, Schmoll says. “Remind them of your history with them, especially if you’ve been a good customer,” he says. “If there are extenuating circumstances, explain that to them. The bank will obviously prefer earning a little less in interest over the potential of you defaulting.”
More from U.S. News
How to Increase Your Credit Score
Carry a Credit Card Balance vs. Pay in Full: What’s Better for Your Credit?
Are Credit Card Installment Plans Worth It?
How to Avoid Credit Card Interest
originally appeared on usnews.com
Update 03/06/25: This story was published at an early date and has been updated with new information.
