Since you’re reading MoneyNing.com, I’ll assume you’d rather receive interest than pay interest. You’ll like this post.
I’m 26 and I’ve never paid a dime in credit card interest. Not paying interest is obviously ideal since I’m not spending money just for the privilege of borrowing money. But going further, this also means that I don’t need to be overly concerned with the interest rate when I shop for credit cards. Since I won’t be paying interest, the rate is really a moot point.
Whether you’ve paid interest before or not – this post will tell you how to keep from ever having to do it again. Let’s get going.
Make Sure You Have a Grace Period
This may come as a surprise, but not all cards have a grace period. Yes, that means some cards begin accruing interest almost as soon as you make the purchase. If you are using one of those, then you’ll have no choice but to pay that 20% interest rate!
As a rule, find credit cards that give you a grace period which is usually around 21 days. Cards that don’t are always rubbish and should be avoided at all costs. The only people who have them are ignorant of the other options. There are cards available even for people with poor or no credit with grace periods, so there is absolutely no reason to get one that immediately slaps you with high interest.
Automation
AutomationWhat you want to do is automate everything you possibly can. We’re all human. We all screw up. I pride myself on being very on top of my finances but I’ve forgotten to pay my credit card bill a few times because I just started a new job and I was just too stressed out and let it slip. To protect ourselves against our imminent mistakes, we can automate things. Sign up for automatic payments and connect your credit card with a bank account. Make sure that the bank account always has enough money to cover your credit card bill. Easy peasy.
Avoid Overspending
This may seem obvious, but it’s worth noting. Avoid spending on credit more than you can afford to spend. Remember, since your payments will be automatic – you need enough in your bank to cover your bill. If you’re always wondering if you have enough, it’ll be hard to automate.
I know what you’re probably thinking, “Why have a credit card if I can’t use it as a loan?” That’s a valid concern.
Wealthy people use credit cards to earn rewards, boost their credit score, secure benefits like extended warranties, get price guarantees, free rental car insurance, access to first class lounges, etc. There are many, many reasons to get a credit card other than to use it as revolving credit line.
If you need to spend more than you can afford, then consider a personal loan. It may have a lower interest rate. An excellent place to check is at your local credit union. There are also many online options worth considering.
Before believing you must spend a certain amount per month, read more articles on this site. Discover why you feel you need to spend so much. Are all of your purchases really necessary? You’ll likely find that many purchases can (and should) be avoided.
A Bonus for Those Who Really Need to (Temporarily) Spend More Than They Can Afford
Okay. Let’s say you do need to borrow more than you can afford to pay back each month. This is what you can do. Try to get a credit card that offers an interest-free period. This may be 3-months, or it may even be a year. Use it to your advantage. Just remember that even these may come with a 3% transfer fee so nothing is truly interest free. If you are responsible, your spending will likely be under control by the time the grace period ends. Remember that your situation is only temporary. You’ll soon be in the green if you set your mind to it.
Have you been able to never pay a dime in credit card interest?