Many people think it’s bad to have credit cards, but will it be true? Credit cards can be very useful if you know how to use them, it is now possible to get a wide variety of products through the Internet, to make such purchases it is necessary to have a credit card.
Main benefits of giving good use to the credit card:
- Create a good credit history. The Credit Bureau records its behavior before banks and different services; that is, how good or unfulfilled has been in the administration of payments. Creating a history helps you build a reputation, and opens doors to different opportunities, such as mortgage and auto loans.
- Does not handle cash. Most credit cards have fraud insurance; that is, that someone outside of you has misused your consent. If there is a problem and you can prove it, your finances continue to be safe.
- You can better control your expenses. Reviewing your account statement letter by letter is key to realizing what you are spending and what you can stop buying in the coming months, as well as what items are worth programming in months without interest.
- You can make use of banking and shopping online. For your security and some services, online transactions require a credit card, in addition to saving you time in traveling to the place where you want to make your payment or a purchase.
- Generates rewards. Look for a card that generates rewards according to your lifestyle; the annuity can be compensated with these benefits.
What is the minimum payment on a credit card?
It is the minimum amount necessary to cover on the payment date so that your credit card is considered current by the bank. However, many people take this amount as the amount to pay each month, which causes their debts to grow and get out of control.
How is it calculated?
Banks ask us to pay a little more debt, however, despite this change, paying the minimum is still a very bad idea. The banks focus their payments on interest, you can spend many months covering the minimum payment and you will notice that you never finish covering the debt.
The way in which banks currently calculate the minimum payment considers the amount that is greater than applying the following formulas:
- Formula A: 1.25% of the line of credit limit
- Formula B: The sum of 1.5% of the unpaid balance of the revolving part of the credit line to the tax cut, plus the interest and the taxes that correspond to them.
If your balance on the card is $ 10,000 and the credit limit granted by the bank is $ 30,000:
- Formula A: $ 30,000 (Credit limit) x 1.25% (Factor) = $ 375 minimum payment
- Formula B: $ 10,000 (Balance) x 1.5% (Factor) = $ 150 + $ 320 (Taxes + Interest) = $ 470 minimum payment
- Then your minimum payment is $ 470 (the largest amount).
Why is it a good idea to make payments greater than the minimum payment?
Paying the minimum and continuing to use your card is a recipe for disaster. If you have several cards and all do the same, then soon you will be spinning in chaos. Do not let that happen to you and if you’re already in the problem, make a payment plan above the minimum payment and stop using your cards until you liquidate them.
When a person goes to a shopping center and observes a product that he would like to buy, the most normal thing is to check his bag to see if it reaches him, often although he brings enough money to make the purchase, he prefers not to because he can understand that If you spend the money, it may happen that you do not reach to cover the rest of the fortnight.
However, when you have a credit card, there are those who feel that the money is not so real, it is so easy to buy anything and charge it to the card, then I tell myself that I am going to pay it later. If you have enough income to pay the total balance at the cutoff date, there is not much problem because interest is not generated.