How to Avoid Credit Card Interest

Use the grace period

Most cards give you a grace period, usually 21 to 25 days between the end of the billing cycle and your payment due date. Under the CARD Act of 2009, if a card offers a grace period it has to be at least 21 days. During that window, purchases don't accrue interest, as long as you pay the full statement balance by the due date.

The key is starting each cycle at zero. If you pay in full every month, the grace period resets and you never pay a cent of purchase interest. If you carry even part of the balance, you typically lose the grace period until you are fully caught up, and new purchases can start accruing interest right away.

One exception: this 21-day minimum is a consumer-card rule. Business cards aren't covered by the CARD Act and aren't required to offer any minimum grace period at all.

Pay the full statement balance, not the minimum

This trips people up: paying the minimum, or any amount short of the full statement balance, doesn't avoid interest. It only avoids a late fee. To pay zero interest you have to clear the whole statement balance. Setting up autopay for the full statement balance is the simplest way to never miss it.

Watch the transactions that skip the grace period

Two things never get a grace period, so interest starts immediately:

• Cash advances. No grace period, a higher APR, and an upfront fee. Interest accrues from the day you take the cash. See what a cash advance costs.
• Balance transfers. A transfer can avoid interest during a 0% intro period, but only after a transfer fee, and only if you clear it before the promo ends. Check whether a transfer is worth it.

Other ways to pay less

• Use a 0% intro APR for planned costs. For a large purchase, a card with a 0% intro period lets you spread payments with no interest, as long as you finish before it ends.
• Ask for a lower APR. A quick call to your issuer, especially with a clean payment history, sometimes gets your rate lowered.
• Avoid cash advances. They are the most expensive way to use a card. Reach for almost any alternative first.
• Pay early if you carry a balance. Since interest accrues daily on a carried balance, paying as soon as the bill is available, rather than waiting for the due date, shaves off a few days of interest.

If you already carry a balance

Once a balance is rolling, the goal shifts from avoiding interest to minimizing it while you pay it down. Pay more than the minimum at a fixed amount rather than letting the required payment shrink, which is the fastest way out. A 0% balance transfer can pause interest entirely while you clear the debt. If you have several cards, the avalanche or snowball method can help you decide what to pay first. For the full plan, see how to pay off credit card debt. And run the numbers first so you know your plan:

• Payoff Calculator →Your payoff date and total interest, with an optional extra payment.
• Minimum Payment Calculator →How slow the minimum really is, and what a fixed extra payment saves.
• Balance Transfer Calculator →Whether a 0% balance transfer actually saves money after the fee.

One more reason to avoid it entirely: unlike some other borrowing costs, credit card interest isn't tax deductible for personal purchases, so there's no offsetting benefit waiting at tax time.