Credit cards are increasingly used to cover our daily purchases, practically all of us have at least one…but do you know the basic rules when it comes to obtaining a card of this type?
Here we give you 7 recommendations to choose the most suitable one and use it correctly.
1. Annual Fee
Is the amount the bank charges annually to lend you the money you have. It includes all the elements that are involved in serving the card user – processing, providing security, monthly alerts, etc..
The basic rule is – lower the fee, lower is the cost of the card.
2. Compare Your Paycheck Against Your Credit Limit
The Credit Limit is the maximum amount you can use to purchase and/or purchase services. This amount varies from person to person and card to card, and is granted according to a bank’s analysis of the history, work, salary of the person applying for the card, among others. Every time you make a purchase using the card, the money available on this line of credit decreases and when you pay down the principal or reduce the debt, you get the line of credit back.
It is recommend that you cap the limit to 60-70% of your monthly income and one more than 4 months of your salary.
That’s right, everyone wants to live the goodness of the famous reward points. One of the factors that can tip the balance on one card or another is the benefits. These may include airline travel miles, special annuity pricing, sweepstakes, event tickets, pre-sales, points to purchase items and vacations, night sales, permanent discounts, sports benefits, partnerships, self-service, among others. It should be noted that while the benefits add to the attractiveness of the card, they may also involve a higher annual cost. Don’t get hooked on a card that offers you points redeemable for things you don’t use, be realistic. If you don’t travel often on the same airline, chances are you’re not going to do it for plastic either.
So don’t get hooked on a card that offers you points redeemable for things you don’t use.
4. No Interest Months
The Monthly Interest Free payment method allows you to purchase products and/or services at a similar price as if you were buying them in cash (paying the payment in a single amount), but with the possibility of deferring their cost within a certain period of time (6, 12, 18 months). This is much better than fixed payments (or credit scheme), because if you pay on time, it frees you from the monthly interest that the bank charges for the financing (interest rate).
However, keep in mind that if you don’t manage your expenses well, months without interest can upset your finances. It is recommended that you project the monthly payment of the purchase together with other financial commitments, to define if it is possible to cover all your expenses. It also suggested that you consider buying after the cut-off date to obtain up to 50 days of financing to start paying.
If you don’t manage your expenses well, months without interest can unbalance your finances.
5. Minimum Payment
When you use your credit card, you are using money borrowed from the bank. That’s why, month after month, the bank (the card issuer) sets a minimum amount you must pay to keep your credit current. If you don’t pay it, you will be charged interest on late payments and you will have a negative credit history, which will lower your chances of getting any type of credit in the future. Paying this minimum amount keeps your credit active, but it’s also a strategy that will only get you deeper into debt. Why? By making full payment, you are avoiding not only your debt, but also the interest. But if you only pay the minimum balance, you have to pay interest on the remaining balance, that is, you are not reducing your debt but increasing it. So remember the following:
“If you pay only the minimum balance, you will go into maximum debt”
6. Prepare Your Account Statements
Credit cards have a cut-off date, which is the last day of the period charged per month. After this day, all purchases you make will go into the next monthly payment and so on. It is important that you have your statements in order because they contain information such as the minimum payment, the payment deadline, the non-interest bearing payment, the credit limit, interest and your balance (total amount you owe the bank), all of which will allow you to see how much you have spent, how much money you need to pay off your debts and whether it is healthy for your finances to continue using your card.
Know if it’s healthy for your finances to keep using your card.
7. Build Credit History
If you handle all your finances in cash, you’re not building a credit history and it will be harder to get a credit card or credit itself, which can help you cover big expenses like buying a house or car. The credit history will help you get more credit, it’s a way for the bank to prove that you’re responsible enough for paying off your debts. So the better your credit history is, the more credit you can receive. If you’re young and have never had credit, you can get cards against fixed deposit which will help in building your credit history.
A good credit history will help you get more credit.