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How To Avoid Interest on a Credit Card

Interest is the worst thing about credit cards, but it can be hard to avoid. Here’s how to navigate that.

February 9, 2022

If you’ve ever racked up interest on your credit card, you’ll know the sinking feeling that comes when you check your credit card bill and see how much the money you owe has accumulated. But there are some strategies you can learn to help you avoid interest on a credit card.

There’s no secret trick to get your lenders to stop charging you credit card interest rates altogether, but there are a few ways to manage your card so you don't reach the stage of interest charges. 

We’ll explain how credit card interest works and run through the solutions to stay clear.

Understanding credit card interest

First of all, it’s essential to clear up what’s going on when you’re hit with charges. Credit card issuers charge cardholders an annual percentage rate (APR) on the balance they fail to pay back in time. The APR represents the total percentage you’d have to pay over a year.

When we mention “interest” throughout this article, we’re referring to APR.

Many people use the terms “interest rate” and “APR” interchangeably, but there are differences since the APR is more specific and accounts for everything, including hidden costs. Credit cards don’t typically involve a lot of additional costs other than annual fees, which APR doesn’t account for, so the two terms tend to mean the same thing — but it’s important to understand the difference. 

The longer you carry an unpaid balance after your payment due date passes and the higher your APR is — lower credit scores usually mean higher APRs — the more likely you are to face high interest charges at the end of the month. If you want to avoid that, the first step is understanding your grace period.

Paying attention to your grace period

We face interest charges when we fail to pay off our total credit card balance. It follows that the easiest way to avoid that problem is to pay everything off in full each month.

This can be more complicated than it sounds due to the number of dates you need to navigate. You don’t need to pay your balance on the last day of your billing cycle — i.e., the closing date of your credit card statement. 

Instead, pay close attention to your credit card grace period, which is the period of time between the end of your billing cycle and your payment due date. After the grace period passes is when credit card companies start charging interest. 

The grace period lasts at least 21 days due to requirements from the Credit CARD Act of 2009, but it can be longer. If you’re unsure of when these dates fall for you, check your credit card agreement.

However, paying your full balance before the end of the grace period every month is easier said than done, so we’ll outline some tips to help you achieve it.

How to avoid interest on a credit card

Everything outlined above is important, but if you’re still not feeling confident about how to actually pay off your outstanding balance by the payment due date, you’ll be pleased to know that we also have some actionable advice that could make all the difference.

Plan how to charge your big purchases

The reason it’s so important to understand the dates associated with your credit card is that you can then time your spending around them.

Instead of making credit card purchases whenever you want to buy something and trying not to think about how you’ll actually fund it all, try to space out bigger items so they fall between different billing cycles.

If your billing cycle falls between Nov. 10 and Dec. 9 and you want a $500 TV and a cellphone worth $800, you could buy the TV on Dec. 1 and the cellphone on Dec. 10 to maximize your chances of meeting your balance payments.

If you know in advance that you’re going to make some big new purchases and you won’t come into money for a few weeks, you can be extra smart by buying something right at the start of your billing period. 

Based on the example above, if you had bought the $500 TV on Nov. 10, you’d likely have a full month plus a grace period of 21 days to find the money — meaning you wouldn’t face interest as long as you could make the payment by about Dec. 30.


Use a credit card repayment app to help

If you already have debt and you’re struggling to keep on top of your credit cards and their associated dates all by yourself, there’s good news: You don’t have to do it alone. 

There are credit card apps that can help out by linking to your credit cards and effectively letting you outsource your admin to them. 

See below for more information on the Tally app

Consider a balance transfer 

There are frequently credit card offers advertising interest-free promotional periods for new customers who transfer their existing credit cards over. The 0% interest period can last as long as a year, buying you more time to collect the funds you need to pay off your balance. 

Are these offers a good idea? They can be if you know for sure you’ll have the money to make your payments by the end of the promotional period. But in some cases, you can end up in a bigger mess, as the 0% interest could give you a false sense of security. 

You may end up putting additional charges on the card or facing a higher APR if you still hold a balance by the time the promotion ends.

Also, beware of balance transfer fees, which can go as high as 5%.

Work with your credit card

When you’re caught in a cycle of credit card debt and interest, it’s easy to see your credit card as an enemy you’re constantly battling. But just like you’re working with your body and not against it when you’re fighting an illness, the same is true when it comes to you and your credit card.

You and your card are on the same team. Learn how your credit card works to improve your situation. Even if you can’t avoid interest completely, it’s important to make your minimum payments to reduce the amount of interest you’ll have to pay and avoid any late penalties. 

Also, the more closely you “follow the rules” of your credit card account, the higher your credit score could be and the more chance you have of accessing lower interest rates in the future. Once you gain some momentum, you could be unstoppable.

Say goodbye to unnecessary interest charges

Nobody said that avoiding paying interest was easy, but putting some time and effort into budgeting and managing your monthly payments is well worth it. You won’t just avoid higher charges, but you’ll also set yourself up for a better financial future.

Consider using Tally† to manage your credit card payments so you can minimize the chance of missing them. Tally can also consolidate your credit cards into a single line of credit, potentially reducing the rates of your higher-interest debt. This way, you only have to pay attention to one due date. 

Knowing how to avoid interest on a credit card is just one step of many you can take to manage your finances. To take things to the next level, subscribe to Tally's newsletter for more great personal finance tips.

To get the benefits of a Tally line of credit, you must qualify for and accept a Tally line of credit. The APR (which is the same as your interest rate) will be between 7.90% and 29.99% per year and will be based on your credit history. The APR will vary with the market based on the Prime Rate. Annual fees range from $0 - $300.