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How Can I Pay Less Interest on My Credit Cards?

Jul 14, 2021 3 min read Beth Braveman

Key takeaways

  • Interest rates are not fixed in stone.
  • Credit card holders can ask their issuer for a lower rate.
  • Lower your interest payments by reducing your overall credit card debt.

Struggling with credit card debt can feel overwhelming, and it's a challenge faced by millions of Americans. The average American credit card balance was $5,897 in 2020, according to Experian.1


If you’re one of those credit card holders carrying a balance, you can take steps to make your debt more manageable and pay less interest. One of them is to reduce your interest rate, which allows more of your money to go toward paying off the debt.


What Is a Good Credit Card Interest Rate?

Credit cards generally carry a higher interest rate than a car loan or a mortgage. A good credit card interest rate is one that’s lower than the current average interest rate, and that number changes constantly based on economic conditions. Some credit cards offer a 0% annual percentage rate for a limited time to entice new signups. You’re more likely to qualify for those credit card offers if you have a good credit score. You may also qualify for a lower interest rate on an existing credit with good credit.

Now is a great time to reduce the interest rates on your credit cards, as interest rates, in general, may be headed upward.2


How to Avoid Paying Interest on a Credit Card

Below are five strategies that every consumer can use to lessen their debt burden and minimize interest payments.

  1. 1. Never miss a payment

    Once you’ve been more than 30 days late on a payment, your credit card issuer can adjust your interest rate to charge you a “default” rate, which can be 10 percentage points (or more) higher than the standard rate, according to ValuePenguin.com. Make sure you never miss a payment by setting up automatic monthly payments for the minimum amount due, or more. Some issuers also raise your rate for going over your credit limit, so set up text reminders to alert you if you're getting close to your limit. Staying below 10 to 30 percent of your overall available credit limit is also good for your credit score.


  2. 2. Negotiate a better interest rate

    If you regularly pay your credit card bills on time, ask your credit card issuers whether they'll lower your interest rate. You might also be eligible for a better rate if your credit score has significantly improved since you opened the account.

    Visit ftc.gov/faq/consumer-protection/get-my-free-credit-report Opens in new window to see how you can get a free copy of your credit report.

    Only a quarter of credit card holders have asked their lender for a lower interest rate, but of those who asked, nearly two-thirds received a rate reduction of an average 5.5 percentage points, according to CompareCards.com. It rarely hurts to ask.


  3. 3. Shop around for better offers

    If your card issuer won't lower your rate—or if you're still unhappy with the rate you're paying—shop around to see whether you can find a better rate from another lender. Ideally, you'll find a card that has a lower overall interest rate and a low or 0% interest on balance transfers for new customers.

    Before signing up, however, read the fine print carefully. Most balance transfer offers also charge a balance transfer fee of a few percentage points of the balance, and the low introductory rate only lasts for a set period of time, such as one year. If the fee is lower than the interest you're currently paying, it may still be a good deal, especially if you can pay off the balance before the interest rate resets.


  4. 4. Consider consolidating your debt

    You may be able to use the proceeds from a lower-interest home equity loan or line of credit to pay off your credit cards. The rates on such loans can be less than half the rates you pay on credit cards, but they're riskier because you're using your home as collateral. That means that if you have trouble making payments in the future, the bank could foreclose on your home. It’s less risky for the bank but more risky for you.


  5. 5. Make repayment a priority

    The best way to pay less interest on your credit cards is to lower your balances. Once you’ve reduced your rate or locked in a balance-transfer offer, take the money that you’re saving on interest and redirect it toward principal payments. If you have more than one credit card, you should always pay the minimums on all of them.

    After that, experts recommend using either the snowball method (paying off the highest-interest debt card first before moving on to others) or the avalanche method (paying off the card with the largest balance). Both approaches have pros and cons, but the most important thing is to pick one and stick with it.

    While you’re paying off your credit card debt (and once you've finished), avoid spending habits that might cause your balance to grow again. Focus on building an emergency fund with enough money for six months' worth of expenses. That way, if an unexpected cost comes up, you'll be able to cover it with cash, rather than resorting to your credit card.


What you can do next

Review each of your credit card statements so you know exactly how much your debt is costing you in the form of interest payments.

Foot note

Beth Braveman is a freelance writer covering personal finance, parenting, and careers. Her work has appeared in dozens of publications, including Consumer Reports, CNBC.com, and CNNMoney.com. She lives with her family in Westchester County, N.Y.


  1. https://www.experian.com/blogs/insights/2020/10/state-credit-2020/

  2. https://finance.yahoo.com/video/powell-likely-going-raise-interest-185153825.html


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