Functioning without a credit card is possible, but it will limit your life if you want to travel or buy anything online. However, it is possible to avoid interest and to even make money on your cards with the right strategy.
Keep Things Simple
According to the experts at SoFi, the best way to avoid interest is the simplest; pay the full balance each month. If you need to carry a balance and want to know how to avoid paying interest on a credit card, you may need to shop around for a 0% APR card.
Don’t Carry A Balance
There’s a myth that carrying a balance can be good for your credit. This is inaccurate; carrying a balance only means that you pay interest. Instead, pay off the balance if at all possible and keep the card open. If you pay off a card and cancel it, you will lower your credit utilization rate and may hurt your credit rating.
Put 0% APR Cards To Work For You
Many of us are running out of money before we get to the end of the month. To get a handle on this, you may need to make some tough adjustments for a year or two. This short-term pain can result in great benefits over time. Create a grid that allows you to track
- who you owe
- the minimum monthly payment
- your total due
- the interest rate
Sort the list first by the minimum monthly payment and address the first five items to free up some money. You may need to switch your phone, cancel cable or get a roommate for a year.
Put all the freed up money on your smallest credit card balance. Pay off the card, leave it open and call the card company to see if you can get a 0% promotional offer for 12 to 18 months. Keep an eye on your mail; paying off one card may bring in offers from other lenders. If you can get these offers, load them up to either completely pay off other balances or to reduce the high-interest balance by as much as possible.
Divide the total balance transferred by the term and do whatever it takes to pay off that card within the terms. Even if you can only make the minimum, make it on time to avoid losing out on the 0% APR terms.
You Lose Nothing By Asking
Call your highest interest cards to shave off as many points as possible. While 18% interest can hurt, 24% will be much worse. Over the course of 2 years, a $5,000 balance will cost almost $1,500 in interest at 24%. At 18%, that $5,000 balance will cost you just over $1,000 in interest.
Another option is to ask for a credit limit increase. By raising your limit, you lower your credit utilization rate. Target the cards that have a strong payment history. If you don’t generally pay your bills on time, block out time once a week to sit down and pay at least the minimum on every bill that comes in. Late fees are a lousy investment.