Credit card interest can be extremely high, with rates of 20% or more commonly being paid by consumers. This level of interest makes credit card purchases very expensive if you don’t pay off the balance in full, and if you’re only making the minimum repayment it’s easy to slip into a spiral of debt.
One of the reasons why credit card interest rates are so high is that the debt is unsecured, which means the lender is at greater risk of being unable to recover their money in the event of default. There are ways to avoid paying credit card interest altogether, however.
Credit card companies provide an interest-free period, which is typically between 48 and 56 days, although you’d need to confirm the timescale with your own credit card provider. If you pay off your total balance within this time you won’t be charged any interest.
Bear in mind that this ‘grace’ period doesn’t apply to each individual transaction, but rather to all the purchases and transactions on each monthly statement you receive from the credit card provider.
If credit card debt has become unmanageable you may be able to transfer the balance onto a 0% interest balance transfer card. Zero interest deals typically last for up to two years, and are very useful as you can avoid paying interest as long as you don’t spend on the card after the balance has been transferred.
If you don’t repay the full balance during the promotional period, or miss a payment, the card company will charge an extremely high rate of interest, however. There may also be limitations on the amount you can transfer.
Interest-free credit cards for purchases work in a similar way to balance transfer cards, but you don’t pay interest on your purchases during the time the deal is offered – this is typically between one and two years, but varies between providers.
Setting up a direct debit to repay your monthly credit card balance in full helps you avoid paying interest - you just need to make sure you have sufficient funds in your current account to cover the monthly payment.
The interest on cash withdrawals is applied immediately, and usually at a rate far higher than that applied for purchases. It’s also made on a daily basis until you pay off the cash sum in full. It’s worth knowing that buying foreign currency with your credit card is treated as a cash withdrawal, as are other transactions including purchasing gift cards and lottery tickets.
Scotland Debt Solutions are committed to helping Scottish residents escape debt. We can offer you tailored advice on how to avoid credit card interest, plus guidance on dealing with credit card debt. Please contact one of the team to arrange a free same-day meeting – we work from offices around Scotland.
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Sequestration is the Scottish version of bankruptcy and may be suitable for you if you do not have the money to pay back your debts
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