Simple Ways to Save on Interest Charges

When it comes to credit cards, the easiest way to save on interest charges is to pay off your balance in full each month and avoid interest altogether. Unfortunately, for most people this isn’t a realistic option. For the majority of people who carry a balance month-to-month, one of the best ways to save money is to take advantage of 0% interest credit cards and find the lowest possible APR after the introductory period ends. There are multiple ways you can save if you shop around.

Taking Advantage of 0% Interest

These days, most credit cards include special 0% APR deals. The gimmick is used to entice you to sign-up for a new credit card or switch from another credit card issuer. 0% APR credit cards allow cardholders to pay zero interest on new purchases and/or balance transfers for a specified period of time and can save you a substantial amount of money. Even an intro of just 6 months can have a huge impact on how much interest you pay. Here’s an example:

Assume you carry a balance of $6000 over the first year:

  • Old Credit Card:
    $6000 x 15.99% = $959.40 in interest charges
  • 0% Interest Credit Card:
    $6,000 x 0.00% = $ 0.00 in interest for 6 months
    $6,000 x 15.99% / 2 = $ 479.70 in interest for 6 months

With a 6-month introductory 0% APR you can save 50% on interest charges over the first year. Just think about how much you could save with a 12-month introductory offer – a savings of nearly nine hundred dollars over the course of a year. When you consider that the average credit card debt for most Americans is more than $10,000, the savings can add up quickly with a 0% APR.

Find the Lowest Ongoing Rate

Unfortunately, a 0% APR doesn’t last forever and eventually you’ll have to pay interest on your credit card balance. Unless you plan on continuing to switch to 0% APR credit cards on a regular basis – which can be advantageous if done in moderation – eventually you’ll want to find a 0% APR offer with the lowest possible ongoing interest rate. Even a small drop in your APR can have a significant impact on your savings. Here’s another example:

Assume your old credit card has an APR of 15.99%. But the new offer is just 10.99%:

  • Old Credit Card:
    $6000 x 15.99% = $959.40 in interest charges
  • New Lower APR Credit Card:
    $6000 x 10.99% = $659.40 in interest charges

By reducing your ongoing interest rate by 5%, you could save an additional three hundred dollars per year on interest charges with a balance of $6000. But unlike an introductory APR which will eventually end, your savings will continue year-after-year with your new lower interest rate.

See our complete list of the best low APR credit cards >

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