How to Avoid Finance Charges on Credit Cards

If you are late in paying off your credit card balance, you will most likely incur additional finance charges on the balance until it is paid. Paying off the balance on time is the best way to avoid these fees. You will usually be given a grace period of around 21 days after receiving the bill to do this. If you just pay off the minimum you will be incurring more and more interest and it will take you a long time to pay off the debt.

 

Method 1 Clearing Your Card Balance

1. At the end of each billing cycle, pay off your balance. The simplest way to avoid charges on your credit card balance is to pay it off in full at the end of each billing cycle. If you pay off the entire balance by the due date on your bill, you will not incur any additional finance charges on the balance.

Paying off your balance on time will also help your credit score improve over time.

2. Check to see if you have a grace period. When you receive your bill, there is usually a grace period during which you can pay it off without incurring charges. These differ depending on the credit card deal you have, so you must review the specifics of your account. The typical grace period is about 25 days.

If your card has a grace period, your card provider must give you at least 21 days after receiving your bill to pay it off.

3. Pay off the remaining balance during your grace period. To avoid finance charges, if your card has a grace period, you must pay off the balance in full before the end of the period. If you have a grace period of 21 days, make sure you pay off the balance before the due date. You can pay until 5 p.m. on the last day without incurring any fees.

Make your payments in plenty of time so that you don’t miss the deadline by accident.

Allow 7 to 10 days for your payment to be applied to your account if you mail it.

Check with your bank about online banking. It could be the same day or three working days. It’s better to be safe than sorry, so pay it off as soon as possible.

If your payment is due on a weekend, it will be carried over to the following working day.

4. Consider transferring the balance to a different credit card. If you are unable to pay off the balance during your grace period, there is an alternative method for clearing the balance. You might be able to transfer the balance to a credit card with a lower interest rate. For example, some credit cards offer 0% APR for a limited time. You will not have to pay any finance charges during this time period, allowing you to pay off the balance more cheaply.

If you are thinking about doing this, you must be cautious and conscientious about your finances.

After the 0% APR period expires, you may be required to pay a higher rate of interest, so make sure you understand the terms and conditions completely.

Remember that transferring a balance from one card to another does not mean you have paid off the debt. Don’t do it just to free up the card so you can rack up more debt.

Method 2 Finding the Best Credit Card Deal

1. Select credit cards that do not have annual service fees. Credit cards come with a slew of charges and fees that you can’t avoid by paying off the balance on time. These include annual fees, which apply regardless of how much you use the card. You can find a card that does not have these unavoidable service charges by shopping around.

You can search a database of hundreds of credit card agreements available online from a variety of companies.

The database can be found on the Consumer Financial Protection Bureau’s website at http://www.consumerfinance.gov/credit-cards/agreements/.

2. Read the small print. Before you sign up for a credit card, you should spend some time reading all of the fine print. Before you activate a card, read it again, and call the company if you don’t understand something. Make sure you understand the interest rate and how finance charges are calculated. Find out if the lender has any plans to raise the interest rate, and if anything seems fishy, avoid working with that company.

Check to see if there are any fees for balance transfers.

When you use the “checks” that come with your bill, you are committing to a balance transfer, which is often subject to additional fees.

3. Determine whether a universal default clause exists. When comparing credit card agreements, make a note of whether or not they have a universal default clause. If you are late paying your credit card bill or any other creditor, the credit card company has the right to raise the interest rate on your card. During the term of the contract, the credit card company may monitor your credit report and change your interest rate.

This clause can also be used if you have a high debt-to-income ratio.

Keep in mind that a higher interest rate or APR on your credit card results in higher finance charges.

If you have a card with this clause, make sure you pay all of your bills on time.

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