5 tips to stop wasting your money on credit card interest

Carrying credit card debt is an increasingly costly proposition. Average interest rates on credit cards have skyrocketed in recent years and are now more than 20 percent. In 2022 — the most recent year for which data is available — credit card companies charged consumers more than $105 billion in interest, according to the Consumer Financial Protection Bureau (CFPB). Consumer credit card debt also reached an all-time high of $1.14 trillion as of Q2 of 2024.

Credit card interest can be a slippery slope that makes getting out of debt difficult. The good news is there are several ways you can avoid this unnecessary debt or handle it responsibly if you do find yourself facing it.

1. Consider a 0% APR offer

A balance transfer credit card offers a way to pay down high-interest debt within a 0 percent introductory period, helping you to consolidate and pay off what you owe faster. The best balance transfer cards offer intro periods of up to 21 months. This means that your full monthly payment will go directly toward paying down your principal, allowing you to fast-track getting out of debt.

But before consolidating your debt with a balance transfer card, factor in a transaction fee of 3 percent to 5 percent of each balance you’re transferring. That means if you’re moving $5,000 to the balance transfer credit card, you’ll pay a fee of anywhere from $150 to $250. But that’s if you can qualify for a card at all.

Balance transfer cards are usually available only to those with good credit, and a borrower must have full confidence that they can and will pay off the balance within the designated promotional window.

— Sean Fox Debt Resolution at Achieve

If you can’t pay off the balance within the promotional period, you’ll pay interest on the remaining balance — and potentially land back where you started. You’ll also pay interest on any new debt you’ve added to your card in the meantime.

If your credit history is not solid enough for card approval, consider a personal loan or debt consolidation loan to pay off your credit card debt. Interest rates on personal loans can be far less than what credit cards charge.

“If you have multiple credit card accounts and are carrying debt on them with high interest rates, it can be an excellent idea to consolidate,” says Fox. “By taking out a new loan that carries a lower interest rate than the credit cards, you would pay off the balances on high-interest accounts. You are then left with just one monthly payment at the lower rate.”

2. Make more frequent payments

You can reduce the interest you pay on credit card debt by making multiple payments on your balance each month. Taking this step reduces your average daily balance, which is what most credit card issuers use to calculate the amount of interest you owe at the end of the month.

Let’s say you have a credit card with a $6,000 balance, and you’ve budgeted $1,000 to pay toward your credit card bill that month. If you make one payment of $1,000 at the end of the billing cycle, your interest will be calculated based on the $6,000 average daily balance. But if you split the $1,000 payment into two and make one of those payments mid-month, it would reduce your average daily balance by $500.

If you get paid multiple times throughout the month, consider setting aside money from each paycheck to put toward your credit card bill. A credit card payment calculator can help you understand how paying more affects what you owe.

3. Tap into existing savings

When you’re trying to save money, it may feel counterproductive to take cash from your long-term savings to pay down your debt. But if you’ve built up a savings account, it’s a strategy that could make sense in the long run. Here’s why: with credit card interest at an all-time high, the interest you’ll end up paying on balances carried from month to month will outweigh any interest you’re earning multiple times over, even if your money is in a high-yield savings account.

Adding to this equation is the fact that credit card issuers typically charge interest on an average daily balance. This means that if you carry a balance, you’re paying interest on your interest, compounding what you owe. If you have savings to pull from and put toward your card debt, you’re reducing the amount of overall interest you end up paying over time.

“Whatever you can do to increase your ability to put more money toward debt repayment will help eliminate that debt faster,” says Fox.

If you’re able to find ways to reduce expenses or add to your repayments, doing so can help rid yourself of debt while keeping your overall interest as low as possible.

4. Call your issuer and request a lower interest rate

While it won’t eliminate interest entirely, you might find that calling your credit card issuer can result in a lower interest rate — even temporarily.

“Credit card interest rates aren’t always set in stone. You may get a lower rate just by asking — many succeed this way,” says Russell Nelson, former manager of credit card products and current manager of contact center strategy at Navy Federal Credit Union.

If your financial situation and your credit score have improved since you first opened the card, you may qualify for a better interest rate. In addition, if you’ve been a good customer with a history of regular, on-time monthly payments, it could also work in your favor to point this out when calling the credit card company.

It’s also a good idea to do your research and know what interest rates other credit card issuers are offering.

“The best way to approach these negotiations is knowing your options,” says Peter Earle, an economist with the American Institute for Economic Research. “Make it clear you know what else is out there and that you have explored money-saving alternatives. Credit card companies are businesses… For that reason, your credit card company would rather cut you a better deal on the terms of your debt than have you transfer your balance elsewhere.”

5. Get on a monthly budget

The convenience of credit cards can lead to overspending, leaving you owing more than you can comfortably repay. Remember, you will ultimately need to pay back what you borrowed from a credit card company, so it’s important to ensure you have the means to do so.

Developing a monthly budget that accounts for all of your monthly expenses and your monthly income can help you stay on track. When creating your budget, also account for bills that you may only pay periodically or semi-annually, such as insurance policy renewals.

You might even consider using a budgeting app that can help track all your spending and expenses and alert you when you’re exceeding monthly budget goals. Many of these apps also identify areas where it may be possible to cut costs, freeing up even more money to pay down your credit card debt. Popular budgeting apps include Monarch Money, You Need a Budget (YNAB) and EveryDollar.

The bottom line

While credit cards can be useful financial tools and have many perks and benefits, interest rates are high. 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. Increasing your income can also help eliminate the debt more quickly. 

No matter which approach you take, it’s always a good idea to establish a budget that can help you keep on track financially over the long term.