 TITLE: What Is APR and How Does It Affect Me? CONTENT: How to Avoid Paying Interest on a Credit Card\n---------------------------------------------\nVirtually all credit cards offer grace periods—typically 21 days or more after each monthly statement closes—during which you can pay your balance with no interest attached.\nYou can avoid paying interest every month entirely by paying off the full balance by the due date. Remember, though, that the grace period applies only to new purchases. Cash advances and balance transfers don't come with grace periods, so sidestepping paying interest is not likely unless you have an introductory 0% APR promotion on balance transfers.\nIf the due date for your payment rolls around and you don't have the funds to pay your balance in full, you will be charged interest on the amount that remains. These finance charges can snowball due the fact you'll be paying interest on your interest charges as well, a practice known as compounding. Compounding interest means you will be charged on everything you owe—the unpaid amount on the card, the previous month's interest and on whatever new purchases you made.\nCredit card interest can get dangerous if you make just the minimum payment every month. Let's say you purchase a big screen TV and a new sofa for $2,500 on a credit card with an APR of 22%. If you commit and plan for paying this off in 12 months, your monthly payments will be about $234, and you will pay about $308 in total interest charges.\nIf, however, you make only the minimum monthly payment—credit card companies calculate this number differently, but we'll say it's $75 for this scenario—you would still be paying on this purchase more than four years later. Not only that, but you'd also pay a whopping $1,399 in interest, making the total cost of this purchase $3,899, or 55% more than the original sticker price.\nIf possible, make it a goal to pay your balance in full each month to avoid interest. If you have to finance a large purchase over time, consider using a 0% APR credit card to save money. END