How to Never Pay a Dime in Credit Card Interest

by Will Lipovsky · 12 comments

wallet of credit cards
Since you’re reading MoneyNing.com, I’ll assume you’d rather receive interest than pay interest. You’ll like this post.

I’m 26 and I’ve never paid a dime in credit card interest. Not paying interest is obviously ideal since I’m not spending money just for the privilege of borrowing money. But going further, this also means that I don’t need to be overly concerned with the interest rate when I shop for credit cards. Since I won’t be paying it, it’s a moot point.

Whether you’ve paid interest before or not – this post will tell you how to keep from ever having to do it again. Let’s get going.

Make Sure You Have a Grace Period

This may come as a surprise. Hopefully. Not all cards have a grace period. Yes, that means some cards begin accruing interest almost as soon as you make the purchase. This means you’ll have to pay that 20% interest rate almost no matter what!

As a rule, find credit cards that give you a 1-month grace period. Cards that don’t are always rubbish. They should be avoided at all costs. The only people who have them are ignorant of the other options. There are cards available even for people with poor or no credit that have 30-day grace periods, so there really is no reason to get one that slaps you with high interests immediately.

Automation

What you want to do is automate everything you possibly can. We’re all human. We all screw up. To protect ourselves against our imminent mistakes, we can automate things. Sign up for automatic payments, and connect your credit card with a bank account. Make sure that bank account always has enough money to cover your credit card bill. Easy peasy.

Avoid Overspending

This may seem obvious, but it’s worth noting. Avoid spending on credit more than you can afford to spend. Remember, since your payments will be automatic – you need enough in your bank to cover your bill. If you’re always wondering if you have enough, it’ll be hard to automate.

I know what you’re probably thinking, “Why have a credit card if I can’t use it as a loan?” That’s a valid concern.

Wealthy people use credit cards to earn rewards, boost their score, secure benefits like extended warranties, get price guarantees, free rental car insurance, access to first class lounges, etc. There are many, many reasons to get a credit card other than to use it as revolving credit.

If you need to spend more than you can afford, then consider a personal loan. It may have a lower interest rate. A good place to check is at your local credit union.

Before believing you must spend a certain amount per month, read more articles on this site. Discover why you feel you need to spend so much. Are all of your purchases really necessary? You’ll likely find that many purchases can (and should) be avoided.

A Bonus for Those Who Really Need to (Temporarily) Spend More Than They Can Afford

Okay. Let’s say you do need to borrow more than you can afford to pay back each month. This is what you can do. Try to get a credit card that offers an interest-free period. This may be 3-months, it may even be a year. Use it to your advantage. By the time the grace period ends, your spending will likely be under control. Remember that your situation is only temporary. You’ll soon be in the green if you set your mind to it.

Have you been able to never pay a dime in credit card interest?

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{ read the comments below or add one }

Kathryn @ Making Your Money Matter April 25, 2016 at 8:04 am

It sounds so simple, and it is! Another thing you can do is to have an emergency fund in place so that if something unexpected comes up, you have the cash for it and don’t have to put in on a credit card. I think that’s how a lot of people end up in debt, not just from overspending.
I do remember once I had to keep some expenses on a credit card for one extra month, but I’m sure my entire life I’ve never paid more than probably around $20 in credit card interest. I certainly will not pay another cent ever again!

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Will Lipovsky April 25, 2016 at 8:23 am

Good point about having an emergency fund. I find it strange when people use a credit card as an emergency fund. They’re just opening the door to another emergency – paying interest!

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David Ning April 25, 2016 at 8:02 pm

Good for you Kathryn. With the myriad of options available to everyone when they need cash, there really are no reason why anyone should carry credit card debt and pay those sky high interest charges!

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Ramona @ Personal Finance Today April 26, 2016 at 4:07 am

It’s important to take A LOT of care when you are using your credit cards, otherwise the fees and commissions are staggering. I’ve never used credit cards, we have debit cards, but did lose about 30 bucks in some fees, since I was too lazy to check my statements and I got into overdraft (the weird thing is that I have zero overdraft on my account), but, hey, the bank apparently didn’t care. Now I am VERY careful and it’s OK

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David Ning April 26, 2016 at 10:00 am

You might be able to talk to the bank and argue that you shouldn’t be charged the fees because you didn’t want that service. You might or might not be successful but it’s worth a try!

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Will Lipovsky April 26, 2016 at 1:03 pm

David is right. I wrote an article about overdrafts recently (yet to be published). Most people are wildly successful at getting them waived – as long as they don’t make overdrafting a habit.

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Johnny @ EarnSmart.co April 27, 2016 at 7:00 am

If you can’t automate your payment, you might try setting payment alerts in your phone or email calendar. Sometimes your payment date can sneak up on you – I’ve definitely had a couple close calls. Now I have a recurring reminder set in my phone to ping me a couple days prior to my due date reminding me to make the payment.

Now that I think about it, this is another type of automation so I guess it’s just another form of your great advice, Will!

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Will Lipovsky April 27, 2016 at 8:22 am

Ha – thanks for the compliment. That’s smart, taking matters into your own hands if automation via the company isn’t an option. There’s always a way!

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Cyrus April 27, 2016 at 4:38 pm

I haven’t paid a dime of credit card interest or fees in almost 10 years. How did I do this? I use a debit card instead! A debit card does just about everything a credit card does, except going into debt and paying interest and fees. I don’t spend any time worrying about paying the balance of a whole month’s worth of charges because each purchase comes right out of our checking account right away. Simple and clean – no bills to pay. Much, much easier to budget and not overspend.

Also, a question for the author: what evidence or research do you have to back up your statement “Wealthy people use credit cards to earn rewards, boost their score, secure benefits like extended warranties, get price guarantees, free rental car insurance, access to first class lounges, etc. ?” In reading material like The Millionaire Next Door and other evidence of the habits of wealthy people, I would argue that most wealthy people are much more focused on ways to grow their investments or business, instead of chasing after a few hundred dollars worth of gimmick rewards from credit cards.

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Will Lipovsky April 27, 2016 at 7:23 pm

Hi Cyrus,

Your impassioned response is fantastic. I’ll dig right in.

Since it’s virtually impossible to define the word ‘wealthy’ (there’s no way to quantify the term) my use of it is negated.

I used to be a Dave Ramsey follower. Until I realized there is nothing inherently evil about credit cards. If you have even a basic appreciation for self control, there’s no reason to fear them. There is lots to gain and nothing to lose. Literally nothing… hence the title of this piece.

I have heard DR dismiss credit card perks as being silly. But some of those perks can be pretty dang sweet. Price protection. Free rental car insurance. First class lounge access (free food, shower, R&R, wifi between flights). These hundreds of dollars add up over a lifetime. And best of all, people are able to build their credit scores so they can get a mortgage or land a good job. Whether it’s a good or bad thing – a credit score is the closest thing we have to a financial report card. A DR mortgage is no walk in the park. People are much better off to use a credit card, pay it off automatically and go about their lives. No one benefits from being scared of credit cards. They are a financial tool just like any other.

I’ve read The Millionaire Next Door. Though I read two books per week and I read that one a few years ago so I’m a little foggy on it. I don’t remember any millionaires bad mouthing credit cards. Also, most millionaires do watch their pennies and thus love credit card rewards.

And I believe most ‘wealthy’ people (really wealthy people, I don’t just mean people who scrimp their entire lives and them feel cool when they of course have a few million lying about) use leverage. So I think it’s safe to say using the term ‘wealthy’ isn’t too out of place.

If using a debit card only works for you – that’s fantastic. But for those who want to use a credit card, paying it automatically lowers the risk to nearly that of a debit card – while opening up a world of rewards.

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Julia May 12, 2016 at 8:54 pm

I live in DR country so I’m constantly around people who love him. I like certain things that he says, but I haven’t been able to get anyone to explain one thing. If you use a credit card, pay off your purchases automatically (as I do) and get cash back and rewards, how are credit cards a bad thing? Most of his fans just shake their hands and say “oookay” and don’t answer the question.

I have a 12 months plus emergency fund plus retirement accounts. My budget is on a mobile spreadsheet and I stick with it. And the extra transaction is a click of a button on my phone or computer. I’ve never paid interest of fees. When I don’t pay things off automatically – in a 0% interest situation – it’s only because I put what I owed in a high interest savings account and paid my balance, in full, with no fees or interest later. This was in addition to the rewards. I used the rewards and savings interest earned for Christmas gifts and to add to my investment accounts. I have no desire to build a business. And for a middle class income, a few hundred dollars I wouldn’t have otherwise had, doesn’t seem bad for maybe 3-4 hours of time per year that I spend on budgeting.

It’s not for people who don’t have a lot of stability and can’t focus and plan. But, I don’t understand completely disregarding the benefits of using the system to your advantage with safeguards.

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Laurie June 25, 2016 at 6:32 am

When signing up for a credit card, it is important that you read the entire application and terms that come with it so that there are no surprises down the road. Great tips, thanks for sharing!

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