How to avoid finance charges on credit cards



How to avoid finance charges on credit cards

Ways you can avoid paying the high financing fees charged by credit card companies

Credit cards are a necessary evil in today’s economy. It is hard to get along without at least one card, especially if you want to make purchases online. You cannot make a hotel reservation online or over the telephone unless you have a credit card and it is impossible to book a flight online without one.

Using a credit card to make purchases of all kinds makes it easy to get along without having to bring cash with you all the time. Very few retailers accept checks and offer you the opportunity to pay by means of a debit or credit card. You can also check the pruchases you make on your credit card, which makes it easy to keep track of your finances.

The problem with having and using credit cards is the high finance charges that are added to the unpaid balance at the end of each statement period. If you continually max out your available credit, the amount of the minimum monthly payment will not be enough to cover the finance charges, thus keeping you in debt.


Instructions

Step 1

Pay off the balance of the card each month

When you receive your statement in the mail or through email, if you only make the minimum payment required, the finance charges are deducted from this amount first and the remainder is applied to your balance. However, if you pay the amount of the outstanding balance in full before the due date on the statement, you will not have to pay the finance charges.

Step 2

Get a zero per cent credit card

Many credit card companies offer an introductory rate of zero per cent on credit cards issued to new customers. If you apply for and receive one of these cards, you can transfer the balance from your high interest credit card to this new one.

There won’t be any finance charges accruing on your outstanding balance, but you do have to pay attention to the period of this no interest. Usually it is for a six-month period. If you can make higher payments on the balance within this period, you can reduce your debt and avoid paying finance charges on your credit card.

Step 3

Pay higher payments on the highest interest card

If you have several credit cards on which you make monthly payments, prioritize them starting with the one that charges the highest rate of interest. Make higher monthly payments on this card, such as making the minimum payment, plus the amount of interest. Since the finance charges are a percentage of your unpaid balance, you will pay lower and lower interest each month and eventually repay the balance in full.

Step 4

Contact your credit card company

If you have been paying on your credit card for several years and have a good credit rating, a simple phone call to the company could help save you money. By asking to have the interest rate reduced or eliminated for a period of time, you can avoid paying finance charges on the credit card.


Things Needed
• credit card statements
• amounts of interest charged on each card
• financial budget to help you plan your payments
• application for a zero-percent credit card

Tips & Warnings
• Make sure you take notice of the amount of interest on each of your monthly statements.
• Paying more than the minimum payment each month, even if it is only $50, will help reduce the amount of money you pay in finance charges.

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