Credit cards can serve a useful purpose, especially for couples just starting out. However, if you don't pay off your bills when they are due, you could end up paying exorbitant interest charges, sometimes in excess of 20 percent. If you feel you have to use credit cards, minimizing your interest expense should be a top priority. Making larger payments on your cards and finding ways to get a lower interest rate can help shrink your interest payments.
Pay by Due Date
With most credit cards, you have 20 to 30 days to pay off any purchases before interest charges kick in. Depending on when you make your purchase, you may have almost two months before your payment is due. If you pay the full amount of your charges before the payment due date, you can reduce your interest payments to zero.
Transfer Your Balance
Not all credit cards charge the same amount of interest. The credit card business is competitive, and many issuers will offer you a low interest rate to entice you to transfer your balances to them. You may be offered a rate as low as zero percent to transfer a balance, although that rate may only last for a limited time. Every percentage point you could lower your interest rate will drop your interest expense.
You may be able to convince your company to lower your interest rate simply by asking. Factors that could work in your favor include a long-standing relationship with the credit card issuer and a spotless credit history with no late payments. If you have additional accounts with the issuer, such as a checking account or a business loan, you may have additional leverage in negotiating a lower rate.
Avoid Fee Triggers
The credit agreement you accepted when you got your credit card typically allows a card company to charge a penalty interest rate for certain actions, such as making a late payment. Credit card penalty rates are often in the neighborhood of 30 percent, dramatically increasing your interest expense. Making a late payment or going over your credit limit can also lead to an additional fee. Late payments show up as a negative mark on your credit report, which could result in higher interest rates on any future credit you obtain.
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