3 Ways I Make Sure I Never Pay Credit Card Interest

The average interest rate on credit cards is higher than you might imagine, at 21.47%. If you are paying this high rate, you are going to waste a lot of money making your creditors richer and yourself poorer.

I don't want to send my hard-earned money into the pockets of credit card companies. So, to make sure that doesn't happen, I've taken these three steps to ensure I'll never owe interest on my cards.

1. I keep my credit card balance below what I can afford to pay back

The key way to avoid credit card interest is to make sure you don't charge more on your cards than you can pay back when your statement comes. If you don't pay your card in full, the issuer begins charging you -- and that's when you can start getting into debt trouble.

There are a few ways to make sure you keep your credit card balance below what you can afford.

One option is to live on a budget and track your spending to make sure you're sticking to your limits. I used to do this, but now that I've capped my fixed expenses and increased my income, I don't like budgeting anymore. Instead, I just check my credit card and bank account balances every couple of days to make sure I'm not charging more than I'll have the cash to pay for.

If you have trouble keeping your spending in check, the budgeting approach may be for you. But if you are pretty good at not overspending, then simply keeping tabs on your balances can be a lot simpler.

2. I have automatic payments set up

In order to make absolutely certain I never end up owing interest charges, I've set up my credit cards so the full balance due is automatically withdrawn from my checking account. I don't even have the option to pay less unless I go to the trouble of turning off the autopay. I absolutely wouldn't do it, since I'd have to go to a lot of trouble only to incur interest costs I'm trying to avoid.

Setting up automatic payments can be a great way to force yourself to pay your full balance, but you do want to be certain there will be enough money in your bank account when the payments come out, so you don't overdraft. If you keep a financial cushion in your account or if you keep good tabs on your credit card spending (or ideally, both), then you won't have to worry about overdrafting.

3. I have an emergency fund so I don't have to charge unexpected expenses

Finally, saving up an emergency fund is one last big step I've taken to make sure I don't get stuck with credit card interest.

See, many people end up with credit card bills they can't pay not because they spend too much on stuff they want, but because a surprise expense crops up. If there's no money to pay for a crucial expense, then putting it on your credit card may be the only option -- and then you could find yourself struggling to pay off that charge and owing interest.

To make sure this doesn't happen, try to save up an emergency fund with several months of living expenses. This can take time, but start socking away any extra funds you have toward this goal ASAP, as even having a smaller fund can protect you from this fate in many situations.

These three steps have helped me avoid credit card interest while benefiting from credit card rewards, and they could do the same for you. Then, you can use your cards without worrying about how much they'll end up costing you.