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There’s only a few ways that credit card issuers get paid by consumers, one of those ways is by charging interest.If you don’t know how credit card interest rates work, it may just surprise you how much you’re having to pay for credit card interest.
Your credit card issuer gives you the luxury of paying your credit card balance over a period of time.That’s great, but carrying a balance on your credit card from month to month usually means you’re going to be paying interest on your balance.If you want to avoid paying interest on your credit cards, pay close attention to this article and we’ll tell you how to do it.
Related Reading: How To Get Lower Interest Rate On Credit Card
Why Is Interest So Bad?
Now, when you end up paying interest on a credit card balance, you always end up paying for more than you initially borrowed from the creditor.If you’re unfortunate to have a high interest rate on your credit card, you’re going to be a lot of money thanks to those finance charges.
Let’s use a simple example.You are going to use $1,000 and pay it off over the course of 12 months.($1,000 x . Over the course of a year, you’ll be paying $50 in interest.
If you’re going to use $10,000 and pay it off over the course of 12 months with that same 5 percent interest, ($10,000 x .
Here’s the kicker, the average APR is around 17 percent, a far cry from our 5 percent examples.
Interest And Your Grace Period
Another way you can avoid paying interest rates is paying your balance off full every month before the end of your grace period.
If you’re like the majority of people, you won’t be able to pay off that $1,000 balance at one time.
You’ve already learned how to avoid paying interest on your credit card every month, pay off your full balance between your grace period.
While a grace period is necessary to avoid paying interest, all credit cards don’t have a grace period.
Another transaction that won’t allow for a grace period are cash advances.
You also want to be careful with balance transfers.
Read Between The Lines
The best advice we can give you is to make sure you read everything prior to applying for a credit card.
For most people, they won’t read this and they don’t fully understand the situation they’re getting themselves into.
You always want to take the time to read your credit card agreements.