This is how I can enjoy credit cards without the disadvantage of accumulating interest.
- Carrying a credit card balance means accruing interest on it.
- Since I don’t like to waste my money, I can avoid credit card interest by using these strategies.
Credit cards have many benefits. Not only are they convenient, but they also allow you to rack up cash back and rewards on purchases you’re already making.
But there is a clear downside to using credit cards. If you accumulate a balance that you cannot pay in full by the time your bill is due, you will be charged interest on any amount you carry over. And the longer you carry a credit card balance, the more money you’ll lose due to accrued interest.
Paying interest to my credit card companies is something I want to avoid at all costs, which is why I make it a point to pay my cards in full every month. This is how I can do that.
1. I stick to a budget
My family follows a budget that allocates money for everything from weekly groceries to gas fill-ups to occasional haircuts. Having a complete and detailed budget allows us to control our expenses and avoid charging too much on our credit cards.
Not only do we have a budget, but we sit down to review it every few months as our income and expenses evolve. This year, for example, we have been spending more on gasoline and groceries due to inflation. We have already made changes to other expense categories to accommodate that necessary change.
2. I check my credit card balances every week
Some people wait until their credit card bills are due to check their balances. But I like to review mine every week. That way, I can make sure I’m not overspending. If I see that I have overspent, it gives me a notice to reduce until my next billing cycle.
Sometimes checking my credit card balances weekly alerts me to unexpected charges. My children attend a summer camp and I had forgotten that I signed up last year to pay tuition in installments from January to May. Earlier this year, I went into one of my credit card accounts and saw a $1,500 charge that I didn’t expect. I’m so glad I did, because I had forgotten about it and had to put the brakes on another larger purchase to account for it.
The purpose of my emergency fund is to bail me out when I get unexpected bills in my lap. But having a good amount of cash in savings also makes it less likely that you’ll have to carry a credit card balance. If an unexpected expense comes up, like a home repair, and I charge it to my credit card for rewards points or cash back, I can dip into my savings to pay off my balance before interest accrues.
Sometimes carrying a credit card balance is unavoidable. But there are steps you can take to reduce your chances of having to spend money on interest, like following a budget, checking your balances often, and making sure you have cash reserves to fall back on.
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