Do you have a credit card but don’t know exactly how to use it to take advantage of the cut-off dates? Or do you simply want to stop paying excessive interest? Here’s how to manage a credit card wisely.
It is common to find people -especially young people- who, due to lack of advice and financial education, use credit cards without realizing the responsibility and consequences that this could bring. In the end, they take on debts that they cannot pay, which leads them to end up reported in credit bureaus.
Having a credit card is a way to maintain a stable economy that can support in times of urgent expenses; it is also a way to inform the credit bureaus of your credit movements, which in the future can help you in the acquisition of other larger credit products. But all this will depend on your behavior and responsibility in the use of the cards. Some recommendations on how to handle a credit card are:
- The first recommendation is that you keep only one credit card, remember that each card charges handling fees and insurance separately, which means that the more cards, the more costs.
- Use credit cards only for really necessary and urgent purchases that can’t wait. If not, save and keep enough money to buy what you want at another time.
- Many people make the mistake of checking only the minimum payment but do not see the detail of what they are paying. In the account statement you should check your cutoff date, total amount, available quota, management fee and that your movements coincide with the ones you actually made.
- Know the interest rate that the bank applies to your credit card, so you can calculate the value of the installment and define the ideal term for your purchase.
- Using a cash advance on your credit card can save you from an unexpected emergency, the recommendation is not to make advances, but if necessary, keep in mind that it is ideal that you define a minimum term to pay the advance, otherwise the bank will defer this advance for up to 24 months, so the costs will rise unnecessarily.
- Add to your monthly budget the payment of your credit card, defining a maximum amount to pay.
- Preferably defer all your purchases to a single installment, so you will avoid paying interest. But be careful when deferring all your purchases to one installment will increase your credit card payment.
- If it is not possible to defer to a single installment, keep track of your purchases during the month so that when you add up the installment for each purchase, it does not exceed the maximum amount of your payment budget.
- Analyze the promotions; for example, when you hear discounts when paying with your credit card. Check in detail the conditions of that payment, and calculate the costs with other means of payment or other credit conditions, so you will know if there really is a discount on the purchase and if it is convenient for you.
- Paying your credit card on time will help create a credit history with points that will surely facilitate access to larger credits such as housing or vehicle.
- If you have several cards, do not use one card to pay another, that is, use an advance to pay the installment of the other card. This generates higher costs than those already defined in the payment you must make.
- Investigate what benefits currently exist in your bank, it may be that by having several products with the same bank, you may receive reductions in rates or you may be exempt from the handling fee.
- If this is the case, validate the option of a portfolio purchase, where you can unify your debts and thus pay less interest without the handling fee. Validate that costs are not increased.
Although credit cards can offer you several benefits, they require a lot of attention and responsibility. In addition, they will always bring with them additional costs that increase with each purchase.
If you have a credit card in debt and everything is deferred for several months so that sometimes you can’t even pay it off each month, our recommendation is that you look for a way to pay off your card completely. To do this you can look for a free investment credit that handles lower interest and costs and thus pay the total of your card and schedule installments more accessible to your economy.