For those who run a balance on a credit card, paying interest might seem like a fact of life. But that’s not the case, especially if you’re paying the sky-high rates that many credit card providers charge.
Even if you can’t pay off the balance, there are some tricks to paying less credit card interest. Before you make your next payment, test out these tactics to reduce the credit card interest you’re charged.
1. Pay your bills sooner
One credit card fact that’s surprising to some: interest charges typically aren’t based on your statement balance. Most card issuers charge interest based on your daily balance instead.
Daily interest is usually calculated by taking the APR on the card and diving by 365. Multiply your balance on each day by that value, add up the results, and you’ll get your total interest for the month.
For purchases, there is a grace period, but that only applies if you pay your statement balance in full. If you don’t, you’ll be assessed interest.
To save on interest if you don’t pay your bill in full, keep your daily balance as low as possible. That way you’re not assessed as much interest as you would if you waited until your statement due date.
The best way to do this is to make payments as early as possible. If you have the money in your bank account and plan to use it to pay your bill, paying earlier can save money.
2. Make payments more frequently
Along with paying sooner, more frequent payments will keep your daily balance lower, too. Most card issuers allow you to make payments multiple times a month.
Consider making a payment each week or twice a month, even if it’s just a partial payment of your balance. Again, you’ll benefit by keeping your daily balance lower.
Paying more frequently might help with budgeting, too. Instead of running up huge balances and hoping you have enough in your checking account, paying more frequently will help keep balances low.
3. Ask for a lower interest rate
If you’re stuck with a balance and are forking over interest to your credit card provider each month, ask for a lower interest rate. While you might be skeptical that the banks would help you at their own expense, you may be pleasantly surprised.
Check out sample scripts to find out how you can do this effectively. If you don’t have luck with the first customer service agent you reach, experts recommending talking to a supervisor or the retention department, both of whom may be more likely to cut deals.
4. Pay electronically
Paying electronically has a major benefit: it gets your payment in faster than paying by check. As mentioned above, every day can matter when it comes to calculating interest.
Many card issuers allow you set up automatic payments or schedule payments ahead of time. Use this feature by linking your credit card account to your online bank account to pay sooner and more frequently.
5. Transfer your balance
If you’re paying too much interest, you can transfer your balance to another credit card that has a lower interest rate. You may even find a 0% APR offer to eliminate interest altogether.
Most cards still charge a balance transfer fee of around 3% to make the change. Do the math and make sure switching is worth it. If you’re paying $120 to transfer a $4,000 balance just to save $5 a month on interest, this move might be a money-loser.
Keep in mind that many of these cards require a good or excellent credit score, so don’t waste your time or potentially damage your credit by applying for cards if you don’t have the credit score to match.
6. Refinance your debt
If you’re stuck paying down your credit card balance and can’t get your card issuer to reduce your interest rate, refinance your debt with a lower interest rate.
Check banks to see if a personal loan with a lower interest rate is an option. You can then use the money to pay off your credit card bill and pay back the bank with less interest instead.
Consider peer-to-peer lending, too. Rates might not be as low as other options but could still be lower than the high rates that many credit cards charge.
7. Stop using credit cards
This may be an obvious piece of advice, but sometimes it needs to be said that you shouldn’t fuel the fire. If you’re already in debt, just put the cards away. Life may be harder without them, but you’ll almost certainly save money on interest.
If you’re looking to keep the convenience and other benefits of credit cards, debit cards can work just as well as credit without interest charges.
8. Avoid cash advances
Credit card cash advances that come as checks or can be withdrawn from an ATM using your credit card are a bad deal when it comes to interest. Most of these offers start accruing interest from the day you take them, which can be a higher rate than for purchases on your credit card. There are typically added fees for cash advances, too.
9. Watch out for scams
If you want to pay less interest, don’t look to agencies for help. You likely won’t get real help lowering your interest payments, and you may actually end up worse off.
The FTC warns against credit card interest rate reduction scams, which often include promises that your payments can be lowered. Often these services aren’t what they claim to be, as “FTC investigators found that people who pay for these services don’t get the touted interest rate reductions, don’t save the promised amounts, don’t pay off their credit card debt three to five times faster, and struggle to get refunds.”
Instead, the FTC suggests calling customer service yourself to negotiate.