5 sure ways to help reduce interest fees on your credit card

The easy part about having a credit card? Using it. The tough part? Paying it off, especially the interest. Here are five ways to help slash interest fees that will ultimately save you money.
These days, a credit card is not only practical, but necessary—you need one to reserve a hotel room, book a flight or rent a car. But credit cards are especially handy for making purchases on the Internet or by telephone, or for walking around without a ton of cash in your wallet. If you always pay your balance in full each month, credit cards can offer you a lot of freedom. If you carry a balance, however, you need to be very careful about the interest you pay.

5 sure ways to help reduce interest fees on your credit card

What is the interest rate?

The interest rate on a credit card is the percentage of fees that is applied to an unpaid balance. In fact, it is your cost for using your card in “borrow” mode when you don’t reimburse your full balance. But when you pay your current month’s balance in full, bingo! You won’t have a single cent of interest to pay, no matter which card it is.

How is the interest rate calculated?

Canadian financial institutions (excluding cooperatives) are obligated to grant you a grace period of at least 21 days without interest, starting on the date the statement is issued. Once the grace period is over, you are charged according to the interest rate that was set out in the credit card contract. For example:

  • Interest on new purchases: no charges on purchases made during the new billing month.
  • Interest on prior purchases: charges apply and accumulate until these purchases are paid for in full.

A warning: Be careful about cash advances. There is no grace period for cash advances and balance transfers. Interest fees begin to accrue as of the transaction date.

How to reduce interest fees (and keep more money in your pocket)

There are five sure ways you can help reduce the interest fees that are owed:

  1. Always pay the total balance of your credit card account by the due date.
  2. If you can’t pay off your balance, pay more than the minimum amount required; doing so will lighten the impact of the interest rate on the unpaid balance.
  3. Make sure you know the interest rate of your credit card. If it is above 15 per cent, consider transferring the balance to another credit card with a lower rate. Talk to your credit card company about their other credit card products.
  4. Avoid taking cash advances from your credit card. Their interest rate is generally higher than it is for purchases.
  5. Consolidate your debts. Make an appointment with an advisor at your financial institution to learn if you are eligible for a lower-interest consolidation loan.

Discuss it with your financial institution

Are you discouraged about how long it could take to pay off your credit card balance? If you're feeling overwhelmed by your debts, you should meet with the credit expert at your financial institution without delay. You’ll see; there’s always a solution.

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