Skip to Content
How interest works
Open toolbar

Take the bonus quiz

Test your knowledge. Earn more points. Get started

What is the only way to avoid paying interest on your credit cards?


Paying fully within the grace period is the only way to avoid paying at least some interest.

Next question
What do you call the amount of money you've borrowed from a lender?


The money you’ve borrowed—whether it’s to buy a home, a charge on your credit card or something else—is called the principal.

Next question

You got 2 of 3 correct

You can retake the quiz to maximize your points, but you won't get additional points for questions you already answered right.

Retake quiz

Key Takeaways

Print version

When it comes to debt, the money you owe is often less of a problem than the interest it costs you. Remember a few basic things so you know how much you could really be paying for your debt.

  • Remember that credit card interest compounds—that means you pay interest on the interest, not just the amount you’ve charged
  • Before taking out a loan, research what kind of interest you’ll be paying
  • Try to keep your credit score high to ensure the best interest rates on loans
  • Check your credit report for free every year with Equifax, Experian, or TransUnion
  • Pay your full credit card balance whenever you can to avoid interest charges
  • Remember that when the prime rate moves up or down, it can change how much you pay for debts like a mortgage, car loan, or student loan and it could also change your return on CDs, money market, and savings accounts
  • Remember that the Federal Reserve Bank raises and lowers interest rates according to how the economy performs
  • Keep an eye out for low interest rates when you need to borrow money—even small changes can make a big difference to you