Millions of consumers blindly pay credit card interest year after year, seemingly oblivious to the fact that there is no need to do so. Every single time a credit card is used which carries an APR above 0% then interest is charged on the total balance unless it is paid off in full each month. Many people are unaware that when they use their credit card to obtain cash the advertised APR on the card isn’t the amount charged, but a much higher rate as stated in the terms and conditions, sometimes almost 30%.
Servicing the credit card bill with a minimum payment increases the debt carried on the credit card and leaves people paying interest on interest. If you find yourself in this situation take the time to study your statements and work out just how much you’ve wasted in unnecessary interest payments to your credit card provider, and think what you could have done with that money. It may well shock you into never carrying a balance again.
There are two ways to stop paying interest on a credit card. The first is to never carry a monthly balance but to pay the card off in full each month. This is good practice and makes the APR on the credit card completely immaterial. Simply use the card only for amounts you know you can clear in full on a monthly basis and this will help to keep your credit score in good order too.
The second way to stop paying credit card interest is only applicable if you carry a current balance which you are paying interest on. Take a 0% balance transfer card and transfer all your current debts onto it. As you won’t be paying interest on the card the interest rate after the introductory period will be immaterial and you should look for a balance transfer card with the longest introductory period you can find. One the balance is transferred destroy the new balance transfer card and begin to aggressively pay down the balance.
You should aim to pay off the debt by the time the introductory 0% rate expires. Make a note of the date when the introductory offer expires and if your calculations show that the debt will not be paid off by this time then be prepared to become a ‘rate tart’ and look for another balance transfer card. Do this at least a month before the current cards 0% offer expires, and transfer the remaining balance. You will be liable for balance transfer fees but as long as the balance transfer cards are used only to pay down debt then the expense is usually justified.
Paying interest on your purchases is quite frankly a mugs game and should be avoided at all costs. If you are aware of how not to pay interest it will become second nature and your purchases will cost you the price you actually pay, rather than the price plus x amount of interest accruing more interest. When all is in order you should then look to obtain a credit card which will effectively pay you for using it rather than the other way round, by sourcing a good cash back credit card.