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8 ways to pay less credit card interest

November 03, 2010

By Barbara Marquand | Money Rates Columnist

Finance charges can cost you a bundle if you run up big credit card balances. Follow these eight tips for minimizing how much you pay in interest to credit card companies.

1. Compare deals online before you apply for credit

Don't rely only on credit card promotions 2012 you get in the mail or see advertised on TV. Use MoneyRates.com to cast your net wider and compare multiple credit card offers side by side.

2. Read the fine print of promotional low rate credit card offers

Make sure you understand how long the promotional interest rate is in effect and you follow all the rules to qualify to avoid any unpleasant surprises. Some low apr credit cards for instance, require you to pay off the full purchase during the promotional period, or you're stuck paying interest from the time you bought the item.

3. Don't use credit card cash advances

Cash advances and convenience checks carry a higher interest rate than regular purchases. Use your debit card to get cash instead.

4. Scrutinize store-brand and rewards credit cards

It's easy to get caught up in the excitement of earning rewards or scoring discounts with store or rewards credit cards. But take a close look at the rates. On average, these cards charge higher interest than non-reward credit cards.

5. Consider credit union credit cards

Check with local credit unions to see if you're eligible for membership and what kinds of deals they offer. Some credit union credit cards feature better terms than cards issued by large national banks.

6. Maintain a high credit score

The higher your credit score, the better rates credit card issuers offer you. Many credit cards feature tiered rates, with the lowest rates reserved for customers with the best credit and the highest rates for those with mediocre credit scores. Pay your bills on time, and keep all your credit card balances below 30 percent of your credit limits to maintain good credit.

7. Pay credit card bills on time

Federal law prohibits credit card issuers from hiking interest rates on existing balances unless you're 60 days late on monthly payments. Avoid outlandish penalty rates, which approach 30 percent, by paying your bills on time.

Meanwhile, be aware that you can get hit with a rate increase when you're only a few days late if the low rate you're offered is part of a special promotion or interest rate rebate program.

8. Pay off credit card balances as quickly as you can

The quicker you pay off your balance, the less interest you fork out to the credit card company. Set a payoff plan and stick to it if you have to carry a balance. Make sure you pay more than the minimum due, or you could be paying for that new flat-screen TV years after the set has gone kaput.

Of course the best way to minimize finance charges is to pay your balance in full every month. Track and keep your credit card purchases within your monthly budget and avoid impulse spending to keep credit card balances within easy reach.

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