How to Avoid Credit Card Interest — or at Least Reduce It

Credit card debt is expensive, and because you can keep spending on your card even when you owe a balance, your debt can grow fast. According to a 2021 NerdWallet study, U.S. households with revolving credit card debt pay an average of just over $1,000 in interest per year.

Sometimes you need to take on debt if you’re dealing with an unexpected expense or you need to cover the bills while you’re out of work. In those cases, taking steps to reduce the interest you pay can help you save money.

Still, the most effective way to save money on credit card interest is to avoid it entirely.

» MORE: Credit card rules you can break in an emergency

Ways to avoid credit card interest

Pay your credit card bill in full every month

If you pay off every bill completely, you won’t carry a balance into the next month, meaning you won’t owe any credit card interest at all. But it can be easy to spend more than you can afford to pay back at once, because using a credit card can feel less tangible than parting with actual cash.

Check in on your credit card activity a few times each month so you can curb your spending if you’re getting close to exceeding your budget.

» MORE: How credit card grace periods work

Consolidate debt with a balance transfer credit card

If you currently have credit card debt, moving it over to a balance transfer credit card will give you a long time to pay down your debt at 0% interest — typically a year or more. This can save you a substantial amount of money.

Let’s say you have $5,000 in credit card debt on a card that charges 15% APR. If you qualify for a balance transfer card offering no interest for 18 months, you’ll save $465 (after accounting for a 3% balance transfer fee) if you pay down your debt within that 18-month time frame.

There are some important things to know about balance transfer credit cards, however:

• You typically need good or excellent credit to qualify for these kinds of cards. That means FICO scores of 690 or higher.

• Most of these cards charge a balance transfer fee of around 3% to 5% of the transferred balance. There are a limited number of no-fee options available.

• The interest rate will increase after the 0% APR promotion ends. If you haven’t fully paid off your balance by then, you’ll begin to owe interest on the remaining amount.

» MORE: What is a balance transfer, and should I do one?

Be strategic about major purchases

If you plan to make an expensive purchase in the near future that you’ll need to pay off over a long period of time, you have options beyond taking on credit card debt. But you’ll want to keep your budget in mind when choosing ways to finance a large expense, because you may be subject to fees for missed payments or interest on remaining debt at the end of a promotion.

• Look for a credit card that charges 0% APR on new purchases. This can give you a year or more to make payments without owing interest. You’ll owe interest on any remaining balance at the end of the 0% APR offer, though.

• Consider deferred interest financing. Some store cards or medical credit cards offer this type of financing; it can be helpful, but it comes with a catch. If you don’t pay your balance in full by the end of the promotional no-interest period, you’ll owe interest on the entire amount you originally borrowed, not just on the remaining balance.

• Opt into a buy now, pay later plan. These plans allow you to split large purchases into a series of smaller payments. You may pay interest or a fee, and may also be subject to late fees if you miss a payment.

» MORE: How to choose a 0% APR credit card

Ways to reduce credit card interest

Use a debt repayment method

It can be hard to face your debt head-on, especially if you’re paying off multiple balances at the same time. But there are techniques you can employ to stay organized and motivated. One technique, the debt avalanche, can help.

With the debt avalanche, you begin by making a list of all your debts in order from highest to lowest interest rate. Then, make the minimum payment on every debt, while applying any extra money in your budget to the debt at the top of the list.

Once you pay off that debt, begin tackling the debt with the second-highest interest rate. As you cross each debt off your list, shift your focus and your funds to the new top priority.

» MORE: NerdWallet’s debt payoff calculator

Make multiple credit card payments per month

You don’t have to wait until the end of a billing cycle to pay your credit card. You can make payments any time, which can help lower your overall interest. This is because the interest you’ll pay is actually based on your average daily credit card balance, not the total balance at the end of a billing cycle.

Making a few smaller payments each month helps keep that average daily balance lower, thus lowering your interest.

» MORE: How is credit card interest calculated?

Tap into savings to pay down debt

To face potential emergencies, it’s essential to have savings set aside. Once you’ve stashed away an amount that can help you through a crisis, you can begin putting additional savings to work by paying down debt. Think of it this way: If you’re paying 15% APR on credit card debt and you pay that debt off, it’s like getting a 15% return on your investment.

» MORE: Is your emergency fund too big?

Consider a personal loan

If a balance transfer card isn’t an option, you may qualify for a personal loan that allows you to consolidate your debts and pay them off at a lower interest rate. And since you’ll make equal monthly payments for a set period of time, it can be easier to budget for these debt payments.