How to Avoid Finance Charges on Credit Cards

Clearing Your Card Balance

Pay off your balance at the end of every billing cycle. The most straight-forward way to avoid charges on the balance of your credit card is to pay it off in full at the end of each billing cycle. Paying off the whole balance by the due date on your bill will mean that you do not incur any additional finance charges on the balance. Paying the balance of on time will also help your credit rating improve over time.

Determine if you have a grace period. Once you receive your bill, you will often have a grace period in which you can pay it off without incurring charges. These vary depending on what credit card deal you have, so you will have to check the details of your specific account. The typical grace period tends to be around 25 days. If your card does have a grace period, your card provider must give you at least 21 days after your bill is mailed for you to pay it off.

Pay off the balance within your grace period. If your card has a grace period, you must pay off the balance in full before the end of this period to avoid any finance charges. If the grace period is 21 days, make sure you pay off the balance in advance of the due date. You can make the payment up to 5pm on the last day without incurring charges. Make your payments in plenty of time so that you don’t accidentally miss the deadline. If you mail your payment, allow 7 to 10 days for the payment to be applied to your account. For online banking, check with your bank. It can be the same day, or it can take three working days. It’s best to be safe, so pay it off early if possible. If you payment due date falls on a weekend it will be carried over to the next working day.

Consider transferring the balance to another card. If you are unable to pay off the balance within your grace period, there is an alternative way to clear the balance. You may be able to transfer the balance to another credit card, with a lower APR. For example, some cards will give you 0% APR for a limited time. In this specified period you will not have to pay any finance charges, so you will be able to pay the balance off more cheaply. If you are considering this, it is important that you are careful and conscientious with your finances. After the 0% APR period expires you may have to pay a higher rate of interest, so you should be completely sure of the terms and conditions. If you transfer the balance from one card to another, remember that you have not paid off the debt. Don’t do this just to free up the card to take on more debt.

Finding the Best Credit Card Deal

Choose credit cards that do not charge annual service charges. There are numerous charges and fees connected to credit cards that you cannot avoid by paying off the balance on time. These include annual fees that are incurred regardless of how much you use the card. By shopping around you can find a card that doesn’t have these unavoidable service charges. You can search through a database of hundreds of credit card agreements that are available from a variety of companies online. The database is available on the website of the Consumer Financial Protection Bureau here: http://www.consumerfinance.gov/credit-cards/agreements/

Read the fine print. It’s important that you spend some time reading up on the all small print before you sign up for a credit card. Read it again before you activate a card, and call the company if you don't understand something. Be sure you know the interest rate and how finance charges are determined. Find out if there are ways for the lender to raise the interest rate, and if anything seems questionable, avoid working with that company. Check to see what fees there are for balance transfers. When you use the "checks" that arrive with your bill, these are considered balance transfers and are often subjected to additional fees.

Determine whether there is a universal default clause. When you are looking at different credit card agreements you should note whether or not they have a universal default clause. This type of clause gives the credit card company the right to raise the interest rate on your card if you are late paying your credit card bill or any other creditor. The credit card provider can monitor your credit report and alter your rates during the contract. This clause can also be activated for a high debt-to-income ratio. Remember that a higher interest rate or APR on your card results in high finance charges. If you have a card with this clause, pay all your bills on time.