Avoiding Interest Payments in 2018

If your New Year's resolution is to get yourself in financial shape adding more to your debt is the last thing you are looking to do. But once you pay down those cards how can you avoid paying interest in the future?

According to a study by NerdWallet referenced in our previous post about credit card debt the average American pays $904 in credit card interest every year. That's just interest.

If you are trying to get yourself into financial shape the added debt of $904 per year just for carrying a balance on your cards is not helpful. So how can you get rid of it?

Eliminate Current Balances

First and foremost is to get your balances down to zero, which of course is easier said than done. But starting with a zero balance is the best time to change your habits and how you use your credit card going forward.

Pay As You Go

Stop using your credit cards for big purchases you cannot pay off within a 30-day timeframe. The best use of a credit card is only using it for purchases you can then pay off during the one month grace period before interest is applied to the balance.

Even if you have a balance start getting yourself in the habit of paying off a month's worth of expenses at a time. If you can't pay off what you charge in January when the February statement comes in the mail then you've charged too much.

If you charge and pay on a month-to-month basis interest will never accumulate because you will never be carrying a balance longer then 30 days. Now you have $904 to spend or save!

Change Your Habits

If you already have high balances and no way to get them down quickly then changing your habits is the best way to avoid heightened interest in 2018.

Look at your credit cards and stop using all but one, ideally the one with the lowest interest rate and the one with the lowest balance. Now start making bulk payments to the others. Once the balance is reduced the interest charged on a monthly basis will also drop significantly. If you aren't accumulating interest so fast you can make payments that actually hit your principal debt.

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