Banking Category Banking: the easy, simple banking guide

How do I stop interest on a credit card?

Stopping interest payments on a credit card without damaging your credit rating is relatively simple if you still have an intact credit score or have access to sufficient funds to pay off your credit card balance in full. If you have neither of those things, you can also elect to cease payments on your credit card until the account becomes delinquent and the company either offers you a rate settlement of some kind or charges it off to a debt collector.

Responsible Method

The most financially healthy method for stopping your monthly credit card interest payments is to pay off the balance in full every month in cash. This will improve your credit score, allow you gain the most benefits from cash back or rewards programs and ensure that you live within your means every month. The downside is that this requires access to ready cash and may require careful budgeting to make it possible.

Transfer Balance

You can also stop paying interest payments by paying off the balance in full every month by taking on more debt. The simplest method is a balance transfer to a card with a 0 per cent introductory rate. There are many specialised balance transfer cards that give you rewards like cash back for every dollar that you transfer from another card. If you have an intact credit rating, you can apply for new balance transfer cards on a regular basis to keep moving your balances to new cards with lower rates. You may also take out an unsecured personal loan, home equity loan or other form of secured loan to pay off your balances every month. This will harm your credit rating less than carrying a balance or missing payments every month, but as your debt-to-income ratio rises, creditors will begin to become leery of extending you more debt.

Deadbeat Method

If your credit card debt is insurmountable, you keep getting turned down for new loans or credit cards and you have no significant assets with which to secure a loan, missing your payments will be the fastest way to stop accruing interest on the account. Once your credit card account becomes at least 60 days delinquent, the credit card company will likely send you offers to reduce the credit card balance, waive late fees and lower your interest rate in return for any payments that you might make. It will damage your credit rating less to take this deal (or try to negotiate it further) than to wait for the account to be sent to collection. If you wait past 90 days to pay your balance, the account balance will be frozen, it will be sold to collection and you will be vulnerable to collection lawsuits. This will remain on your credit report for seven years, but will open up opportunities to settle the debt for much less than the full amount.