When Your Credit Card Interest Rate Doesn’t Matter

/ BY / Credit Cards

Shopping around for a new credit card? One of the first things you’re likely to check is the interest rates on all the cards you’re considering. The lower the interest rate, the less money you will have to pay out in interest if you carry a balance.

But there’s an even better choice--you could make those interest rates irrelevant. Pay off your balance every month, and it doesn’t matter what interest rate the credit card company wants to charge you. You won’t be giving them an extra cent in interest.

It can be tough to break the balance habit. It’s a lot easier to pay only what you think you can afford each month without worrying about the long-term consequences. But there are many good reasons to come up with the cash to make your credit card payments in full.

  1. It keeps you aware of your total debt picture. Make only minimum payments and it’s easy to lose track of how much you owe on all your cards combined. You focus on how much of your paycheck you’ll need to put towards those payments, instead of on how big a debt hole you’re digging.  Pay off your cards each month and you can be confident that you’re at least staying out of credit card debt.
  2. Making full payments helps you stick to your budget. Say you’ve allotted $300 of your paycheck this month for your Visa or MasterCard bill and you’ve already made several purchases totaling $250. You may resist the urge to splurge on something else if you know that buy will blow your budget. (Not to mention, you’ll have to come up with extra money to pay for it.)
  3. You’ll be in good shape when you have an expensive emergency. There are going to be times when you may not be able to pay off a balance. Some months you may have to spend several hundred dollars on car repairs or pay a plumber to replace your broken hot water heater or fix your clogged toilet.  But it’s a lot easier to handle those unexpected expenses and you’ll pay them off faster if you’re zeroing out your account each month.
  4. It will help you keep your credit utilization rate low--and that’s good for your credit score. (Your credit utilization rate is the amount of money you owe in relation to the total amount of credit you have. The lower the credit card utilization rate, the happier creditors are and the better your credit card score.)

    It’s all too easy to let your credit card balances creep up until you’re using a greater percentage of your available credit. Paying in full will help you keep that tendency in check.
  5. It gives you more choices in which credit cards you use. Have high interest rates made you hesitant about applying for a card branded with your sports team logo?  When you pay off your balance each month, you can afford to ignore that high rate because it won’t affect you.


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Please note your financial situation is unique and our tips & advice presented here may not be appropriate for your situation. CreditCardXpo.com recommends that you seek different advice & opinions from your own accountant or financial adviser who understands your individual circumstances before making any important decisions or implementing any financial strategy.