Banks add interest charges to the balances of people who carry any amount of credit card debt. This is the amount one pays for the convenience of borrowing money, and it's the way card issuers generate revenue. Below, learn more about how interest works and how to minimize the amount you owe.

How Credit Card Interest Works

The annual percentage rate (APR) is the amount of interest applied to credit card debt over the course of a year. This is typically determined by your credit score and disposable income levels. Your APR can vary significantly from one card to the next, even on the same account. For instance, a bank might offer low or 0% APR for a certain introductory period, then increase the interest rate once this period ends.

To calculate your card’s interest rate, divide its APR by 365, the number of days in a year. The resulting number is how much extra money you’ll pay on credit card debt each day you carry over a balance from the previous months. 

How to Avoid It

The best way to avoid interest on credit cards is to pay their balances in full each month. Another option is to open a card with a 0% introductory APR, transfer balances from other cards to this card, then pay off the total within the introductory period.

You can also reserve one card for the daily expenses you have enough funds to cover. This way, you’ll be able to pay the bill in full at the end of the month and avoid interest on those expenses. To minimize the additional interest you can accumulate from overspending, consider requesting a lower credit limit from the bank.

If credit card debt becomes unmanageable, explore all available debt relief options with an attorney. Robert A. Schwartz is a bankruptcy lawyer who has been serving the metropolitan area of Rochester, NY, since 1982. He offers representation in both personal and business bankruptcy claims to help you start afresh. Call (585) 334-4270 to schedule a consultation or visit his website to learn more about this type of debt.