It’s official – Americans owe a ton of money in credit card debt. Actually, it’s more than a ton: it’s $1 trillion, which is even more than the previous high set in April 2008 just before the Great Recession, according to Federal Reserve data.
On top of this debt, the average credit card interest rate is also at an all-time high at slightly more than 16%. That means if everyone carried their balances from month-to-month and paid interest, we’d be collectively paying $160,000,000,000 in interest, on average, on our credit card debt.
Not everyone is a “revolver” (someone who carries a balance from month-to-month instead of paying their balance off in full). However, about 43% of us are revolvers, meaning we’re each paying, on average, an extra $855 a year in interest charges.
That adds up to a lot of money paid in interest.
Now, before you let these figures set in and crush your soul, know that it’s possible to avoid paying interest or to pay significantly less, even if you carry a balance from month to month.
Four ways to avoid or reduce interest
- Consider a balance transfer
- Sign up for a card with introductory 0% APR
- Take advantage of your affiliations
- Explore student-specific cards
Option #1: Consider a balance transfer.
If you’re paying a high-interest rate on a large balance or multiple balances, you might want to consider a balance transfer. Many balance transfer credit cards offer extended 0% intro APR on transferred balances, giving you time to pay off any outstanding debts interest-free!
The includes 18 months of 0% intro APR on balance transfers (After that ongoing APR is 13.74% – 24.74% variable.)! You’ll also enjoy no annual fee and a robust rewards program.
Option #2: Sign up for a card with introductory 0% APR.
Know that you’ll need to make several large purchases in the coming months? Sign up for a card with extended 0% introductory APR on all new purchases. Many cash back credit cards offer a year or more of 0% intro APR, allowing you to avoid paying interest while you pay off your purchases.
The gives cardholders 15 months of 0% introductory APR on both purchases and balance transfers. The card also features no annual fee and unlimited 1.5% cash back on every purchase.
Option #3: Take advantage of your affiliations.
If you qualify to become a member of a credit union, you may be able to benefit from competitive rates and terms as well as reduced fees. Membership in a credit union is typically based on a common bond, such as your employer, geographic location, homeowners’ association, place of worship, and more. See if credit unions you qualify for promote attractive interest rates on credit cards or loans.
If you’re a member of the military, the suite of USAA credit cards boast low APR rates. Need to build credit? The offers low variable APR rates from 11.65% – 21.65% with extra-low 4% APR during deployment or PCS.
Option #4: Explore student-specific cards.
If you’re a student, you probably haven’t had many opportunities to build credit yet, and therefore are probably facing higher-than-average interest rates. The best student credit cards offer APR as low as 13.99%, which can allow you to save a few bucks on interest while building credit.
The offers 0% introductory APR on purchases for the first six months (After that ongoing APR is 14.74% – 23.74% variable). Use those six months to establish good credit habits while avoiding interest!
Bonus option: Pay your balance off in full and on time each month!
You can always avoid paying interest by paying your balance off in full and on time each month, no matter what card you have in your wallet.
While 43% of us may pay interest each month due to revolving debt, it is possible to avoid paying interest altogether. Any one of the options listed above can help you build positive credit and establish good financial habits.
- Sign up for payment reminders, set a calendar alert, or use a financial monitoring software or app that notifies you when payments are due.
- Break your payments up into smaller chunks. If you’re only paying once a month, you may fall into the habit of “out of sight, out of mind.” Instead, try making payments every paycheck or once a week.
- Treat your credit card as a debit card, and only charge what you can afford to pay off. If you can only spend $200 in a given month, then only charge $200. This way, you won’t carry over debt you can’t afford.
- It’s worth repeating once again: Pay your balance off in full and on time each month. Not only is this essential to avoiding interest payments, it’s also vital to building a healthy credit score.
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