5 Ways to Pay Less Credit Card Interest

Credit card interest is expensive. Here are five ways to reduce the interest you pay on your card and keep more money in your pocket.

Average credit card interest rates in the U.S. are over 16%. If you carry a balance, you could pay a fortune in interest each month. And you may be destined to make those payments for years.

Yet The Ascent's study found 60% of Americans carry credit card debt. That's millions of people contributing to the hundreds of billions paid to credit card companies every year. But this doesn't have to be your fate.

There are lots of ways you can reduce the credit card interest you pay. That means more money in your pocket and less going to your credit card company. Here are five good options:

1. Pay off your card early

The best way to pay less credit card interest is to pay off your balance in full every month. If you can pay off the balance by the due date, you won't owe any interest.

Are you already carrying a credit card balance? Then the ship has sailed on avoiding interest altogether. But you could still save a fortune by making more than the minimum payment.

Say, for example, that you owe $5,000 on a credit card at 16% interest. The minimum payment is the greater of $25 or 2.5% of what you owe. If you pay the minimum, you'll take 195 months to pay off your balance (assuming you don't charge any more on the card). You'll pay a total of $5,010.05 in interest charges during 16.25 years of debt repayment.

What if you commit to paying $300 on your credit card each month instead of the minimum? You'll take just 19 months to pay off what you owe and will incur only $692 in interest.

The bigger the payments you can make and the earlier you pay off your debt, the more you'll save.

2. Ask your creditor to reduce your interest rate

Many people assume the interest rate they're paying on their credit card is set in stone. But this isn't necessarily the case. In fact, you can often negotiate with your creditors and ask them to lower your interest rate.

Try calling your customer service number and requesting a lower interest rate. Be polite, and be ready to hear a "no." But call again if they reject you the first time. You may get a more helpful customer service rep in the future.

It can also help to research what other cards charge and come prepared with details on competitor offers. Card issuers don't want to lose your business if you've been a good customer and routinely pay on time. They may be willing to match a competitor's rate if doing so will convince you to stay a customer.  

3. Use balance transfer cards

Are you carrying a balance on your credit card? You don't have to leave the debt with that card issuer as you pay it off. Instead, you could opt to use a balance transfer card.

Balance transfer cards offer low promotional rates for a limited time period on transferred balances. These rates are often 0%. You may have to fulfill certain requirements, such as transferring the balance within 60 days of opening your account.

Some balance transfer cards charge you a fee for transferring a balance. But by jumping through a few hoops, you could potentially save a lot of money.

If you score 0% interest on a $5,000 balance for 15 months, all of your payments go towards your principal balance. It's much easier to repay what you owe without making interest payments. Ideally, you should pay your transferred balance in full by the time the promotional rate expires.

There's one caveat: If you'll still be stuck with a balance at the end of the promotional period, make sure you know what interest rate you'll pay on the outstanding amount. If it's much higher than your current rate and you'll still owe a lot, the transfer may not be worth it.

4. Pay off your cards with a personal loan

Another way to reduce the interest rate and total cost of credit card debt is to take out a personal loan and pay off what you owe.  Many personal loans have significantly lower interest rates than credit cards, and personal loan funds can be used to consolidate and refinance credit card debt. This means you could pay off one or more existing credit cards. That lowers your rate and reduces the number of payments you make each month.

Consolidation could save you a substantial amount in interest and give you a fixed timeline to repay your debt. You'll know exactly when you'll become free of your debt burden.

Say, for example, you have two credit cards:

• One with a $5,000 balance at 15% interest with monthly payments of $125.
• One with a $3,000 balance at 16% interest with monthly payments of $75.

If you take out a 36-month personal loan with 9.49% APR, your new monthly payment will be $256.23. You've reduced your payment time by 1.95 years with your consolidation loan and you'll save $2,208.86 in total interest.

Consolidating with a personal loan can create substantial savings and allow you to pay much less interest. Just make sure you can qualify for a personal loan large enough to consolidate your debt. Shop around among different lenders and comparing rates and terms to maximize your savings.

5. Stick to 0% APR cards for purchases

If you have to carry a balance on a credit card, look for a card that offers 0% APR on purchases as an introductory offer. If you get a card that won't charge you interest for 12 or 15 months after you become a cardholder, you can go for a long time without incurring interest charges.

Ideally, you'll be able to pay off those purchases before the promotional rate ends and won't have to pay interest at all.

Of course, it's always best to not carry a balance. Only use this strategy if you have to.

Start looking for ways to lower your credit card interest

There are lots of options available to help you pay less in credit card interest:

• Paying off your card early.
• Asking your card issuer to lower your rate.
• Transferring your debt to a balance transfer card.
• Use a personal loan to consolidate and refinance credit card debt.
• Sign up for a card with a 0% APR promotional period.

You just need to figure out which choice makes sense for you. If you owe a balance, act quickly to lower your interest costs so you don't waste a fortune paying interest.