The best way to make the most of credit cards is to pay the balance in full each month. If you're unable to do that, consider a 0 percent interest balance transfer card or calling your credit card issuer and negotiating a lower interest rate.
Pay off your balance every month.
Avoid paying interest on your credit card purchases by paying the full balance each billing cycle. Resist the temptation to spend more than you can pay for any given month, and you'll enjoy the benefits of using a credit card without interest charges.
In contrast, the "avalanche method" focuses on paying the loan with the highest interest rate loans first. Similar to the "snowball method," when the higher-interest debt is paid off, you put that money toward the account with the next highest interest rate and so on, until you are done.
Most credit cards provide an interest-free grace period of around 21 days starting from the day your monthly statement is generated, to the day your payment is due. However, if you don't pay it during that time, an interest charge will go into affect and you will end up with a balance that rolls over to the next month.
Interest on purchases
If you pay off the whole amount (the balance) owed on the card by the due date, you will not be charged interest on your purchases. But interest may be added for cash advances.
Payment history: The biggest factor in determining your credit score is payment history. Every time you pay a credit card bill, car payment, house payment, student loan payment, etc., it gets added to your history. It's important that all of your payments are paid before the due date listed on your statement.
Make multiple payments each month
Credit card issuers assess interest based on your average daily balance, not your balance at the end of the month. Paying more than once per month — say, every two weeks — will reduce that average balance and, with it, your interest charges.
This means that unpaid credit card balances can grow rapidly, making it increasingly difficult to catch up. When you add in the revolving nature of credit card debt, which allows you to continually borrow up to your credit limit, it's easy to find yourself trapped in a cycle of debt.
Paying off your monthly statement balances in full each month is the path to avoiding credit card debt. As long as you pay off your statement balance in full before the due date, you can continue making purchases on your credit card without paying interest until the next statement due date.
Ways to avoid credit card interest or pay less in interest
Pay off your balance entirely within the grace period, and you can avoid paying any interest on purchases. However, this only works if you pay off your statement balance in full each month by its due date.
Over time, only paying the minimum balance can negatively affect your credit score as the balance you carry affects your credit utilization ratio, which accounts for about 30% of your score.
Use the debt snowball method
In order to use this method, list all of your credit card debts from lowest balance to highest balance. Now start concentrating on wiping out the credit card with the lowest balance while still making the minimum payments on the other cards. The point of this strategy is to build momentum.
Making a late payment
Your payment history on loan and credit accounts can play a prominent role in calculating credit scores. Even one late payment on a credit card account or loan can result in a credit score decrease, depending on the scoring model used.
Debt avalanche: Focus on paying down the debt with the highest interest rate first (while paying minimums on the others), then move on to the account with the next highest rate and so on. This might help you get out of debt faster and save you money over the long run by wiping out the costliest debt first.
When it comes to credit card payback strategies, the option that would result in paying the HIGHEST amount of interest is: Making the minimum payment (3% of your credit card balance) every month with an occasional late payment.
Payment history — whether you pay on time or late — is the most important factor of your credit score making up a whopping 35% of your score. That's more than any one of the other four main factors, which range from 10% to 30%.
Since paying only the minimum on your credit card debt could end up costing you thousands and take years to repay, you shouldn't follow this strategy once you can afford to pay more.
Only borrow what you need
But remember, you only have to pay interest on whatever you borrow from your line of credit and not the total limit. So, to avoid paying extra interest, make sure you only withdraw what you actually need.
You could avoid credit card interest by paying off your statement balance by the due date. Even if you can't pay the full balance off, making larger or multiple credit card payments may help you lower interest. A balance transfer can help you manage higher rate credit card debt.
The 15/3 rule, a trending credit card repayment method, suggests paying your credit card bill in two payments—both 15 days and 3 days before your payment due date. Proponents say it helps raise credit scores more quickly, but there's no real proof. Building credit takes time and effort.
It's a good idea to pay off your credit card balance in full whenever you're able. Carrying a monthly credit card balance can cost you in interest and increase your credit utilization rate, which is one factor used to calculate your credit scores.